Deflation and economic growth: The great depression as the great outlier

Result code in IS VaVaI
<a href="https://www.isvavai.cz/riv?ss=detail&h=RIV%2F00216208%3A11230%2F17%3A10366846" target="_blank" >RIV/00216208:11230/17:10366846 - isvavai.cz</a>
Result on the web
<a href="https://mises.org/system/tdf/Deflation%20and%20Economic%20Growth%20The%20Great%20Depression%20as%20the%20Great%20Outlier.pdf?file=1&type=document" target="_blank" >https://mises.org/system/tdf/Deflation%20and%20Economic%20Growth%20The%20Great%20Depression%20as%20the%20Great%20Outlier.pdf?file=1&type=document</a>
DOI - Digital Object Identifier
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Result language
angličtina
Original language name
Deflation and economic growth: The great depression as the great outlier
Original language description
This paper deals with the relationship between deflation and economic growth. Although there are numerous theories on the potential effects of deflation on real output, empirical evidence in this field is still incomplete. In order to explore the relationship between prices and output in a more comprehensive way, I use a large panel data set of 20 countries over roughly 150 years, which contains frequent deflationary episodes. Since mainstream macroeconomists often refer to alleged bad historical experience with deflation, I employ an econometric model to examine both contemporaneous and lagged correlation between prices and output. There are two important results. First, there is no general relationship between price growth and output growth. Coefficient estimates have very small magnitude in both the whole sample and in different monetary regimes. Second, well-known episodes of deflation differ a lot. The Great Depression is the only period where deflation seems to be strongly associated with recession. By contrast, Japan in the 1990s and 2000s bears no resemblance to it. Here, both empirically and theoretically, deflation is highly unlikely to have caused economic stagnation. (C) 2017 Ludwig Von Mises Institute. All rights reserved.
Czech name
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Czech description
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Type
J<sub>SC</sub> - Article in a specialist periodical, which is included in the SCOPUS database
CEP classification
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OECD FORD branch
50201 - Economic Theory

Publication year
2017
Confidentiality
S - Úplné a pravdivé údaje o projektu nepodléhají ochraně podle zvláštních právních předpisů

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