Paul Krugman Explains Inflation and Deflation

Paul Krugman:

This is probably a good time to point out something that should be widely understood: inflation and deflation are not symmetrical. Four percent inflation does very little harm; four percent deflation is a disaster. Why? Three reasons:

1. The zero lower bound: you can always raise interest rates, but you can’t cut them below zero, so deflation means significantly positive real rates even in the depths of a slump, making monetary stabilization much harder if not impossible.

2. Nominal wage rigidity: it’s hard to get wage cuts — always has been, and always will be. So deflation messes up labor markets.

3. Debt: deflation is always contractionary, because it redistributes wealth to creditors and away from debtors, who are almost by definition more likely to be spending-constrained. And in the euro context this means that imposing deflation on debtor countries worsens the downward pressure on the European economy.

So European policy that requires deflation on the part of a large part of the zone is a real disaster.

本篇發表於 經濟學 並標籤為 , , , , 。將永久鏈結加入書籤。


在下方填入你的資料或按右方圖示以社群網站登入: 標誌

您的留言將使用 帳號。 登出 /  變更 )

Google photo

您的留言將使用 Google 帳號。 登出 /  變更 )

Twitter picture

您的留言將使用 Twitter 帳號。 登出 /  變更 )


您的留言將使用 Facebook 帳號。 登出 /  變更 )

連結到 %s