This book was originally published in 2004. Fears of deflation seemed nothing more than a relic of the Great Depression. However, beginning in the 1990s, persistently falling consumer prices have emerged in Japan, China and elsewhere. Deflation is also a distinct possibility in some of the major European area economies, especially Germany, and emerged as a concern of the US Federal Reserve in 2003. Deflation may be worse than inflation not only because the real burden of debt rises but also because firms would confront rising real wages in a world where nominal wage rigidity prevails. This volume explores some key themes regarding deflation including: (i) how economic agents and policy makers have responded to deflation, (ii) the links between monetary policy, goods price movements, and asset price movements, (iii) the impact of deflation under different monetary policy and exchange rate regimes, and (iv) stock market reactions to deflation.
• Entirely devoted to the ominous subject of deflation • Contributors are leading financial historians and analysts from North America and Europe • Deflation is an international threat, has been present in Japan and possibly in Germany and the US as well
List of tables and figures; List of contributors; Preface; 1. Fears of deflation and the role of monetary policy: some lessons and an overview Richard C. K. Burdekin and Pierre L. Siklos; Part I. Fears of Deflation and the Role of Monetary Policy: 2. Deflation, silent runs, and bank holidays in the great contraction Hugh Rockhoff; 3. Price change, financial stability, and the British economy, 1870–1939 Forrest Capie and Geoffrey Wood; 4. Deflation dynamics in Sweden: perceptions, expectations, and adjustment during the deflations of 1921–1923 and 1931–1933 Klas Fregert and Lars Jonung; Part II. Deflation and Asset Prices: 5. Boom-busts in asset prices, economic instability, and monetary policy Michael D. Bordo and Olivier Jeanne; 6. Deflation, credit and asset prices Charles Goodhart and Boris Hofmann; Part III. International Perspectives on Deflation: 7. Is deflation depressing? Evidence from the classical gold standard Michael D. Bordo and Angela Redish; 8. The strong Lira policy and deflation in Italy's interwar period Michele Fratianni and Franco Spinelli; 9. Deflation and stagnation in Japan: collapse of the monetary transmission mechanism and echo from the 1930s Michael M. Hutchison; Part IV. Stock Market Adjustment to Deflation: 10. Deflation, the financial crises of the 1890s, and Stock Exchange responses in London, New York, Paris, and Berlin Lance Davis, Larry Neal, and Eugene White; 11. The Stock Market and the business cycle in periods of deflation, (hyper-)inflation, and political turmoil: Germany 1913–1926 Martin T. Bohl and Pierre L. Siklos; 12. Deflationary pressures and the role of gold stocks: 1929, 1987 and today Richard C. K. Burdekin and Marc D. Weidenmier; References; Index.
Review of the hardback: 'Slow deflation was once a widely espoused policy goal in its own right, and it still has its supporters. Perhaps more important, potentially deflationary accidents are bound to happen from time to time in a world that has settled for low inflation, because not all shocks emanate from monetary policy. This volume is an indispensable source of wisdom on the variety that deflationary episodes have displayed in the past, and on the many intellectual and practical challenges that they have presented to economists. Burdekin and Siklos are to be congratulated on a collection of essays that is historically illuminating, intellectually challenging, and of current policy relevance, too.' David Laidler, University of Western Ontario, Canada
Review of the hardback: 'In this volume, a distinguished set of scholars make important contributions to monetary history and to a number of contemporary policy debates including the role, if any, asset prices should play in setting monetary policy, the use of exchange rates as nominal anchors and whether Japan has fallen into a Keynesian liquidity trap. The contributors provide strong support for inflation targeting to avoid not only high inflation, but deflation as well.' Thomas Willett, The Claremont Colleges