Abstract:Deflation is currently considered as one of the most important threats for macroeconomic dynamics and, thus, it is argued that it should be avoided by all available means. We challenge this view because empirically it cannot be verified that deflation periods necessarily go hand in hand with recessions. Thus, costs of deflation might be much lower than typically assumed. If for monetary policy makers, a possible conflict of interests between the avoidance of deflation and the safeguarding of financial stabilit… Show more
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