Template-Type: ReDIF-Article 1.0
Author-Name: István Ábel
Author-Email: abeli@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)

Author-Name: Kristóf Lehmann 
Author-Email: lehmannk@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)

Author-Name: Gergő Motyovszki
Author-Email:  motyovszkig@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)

Author-Name: Zoltán Szalai
Author-Email: szalaiz@mnb.hu  
Author-Workplace-Name: Magyar Nemzeti Bank (Central Bank of Hungary)
Title: Deflation fears in developed economies
Abstract: Fears of deflation in the euro area intensified in early 2014. Low or negative inflation in several euro-area countries has increased
the risk of deflation. The European Central Bank’s communication suggests that the Bank considers deflation a genuine risk.
In Japan, economic policy has been struggling with deflation for over a decade now and has recently introduced a number of
quantitative and qualitative easing measures. While Hungary is not directly threatened by deflation risks, persistent deflation in
the euro area and the associated stagnation would have an adverse effect on this country as well. In this article, we explain that
a decrease in price levels does not in itself constitute deflation. By contrast, if the decrease in prices is extensive and sustained
and if it is incorporated into expectations, and if a liquidity trap constrains the scope of monetary policy and there is a genuine
risk of a debt spiral, then there is a danger of deflation.

Classification-JEL: E31 E43  E58
Keywords: financial crisis, deflation, monetary policy
Journal: MNB Bulletin
Pages: 7-17
Volume: 9
Issue: 2
Year: 2014
Month: July
File-URL: https://www.mnb.hu/letoltes/abel-lehmann-motyovszki-szalai.pdf
File-Format: Application/pdf
Handle: RePEc:mnb:bullet:v:9:y:2014:i:2:p:7-17