Illing, G. (2014) “Should the Euro Area Be Concerned About Deflation?“, INTERECONOMICS, Vol 49, No. 3· Μάιος/ Ιούνιος 2014.
During the past few years, headline inflation (the change in the harmonised consumer price index, HCPI) in the euro area has fallen steadily, from three per cent at the end of 2011 to 0.7 per cent in April 2014. It is now far below the ECB’s target rate of inflation of below, but close to, two per cent. Part of the recent decline in inflation across the euro area is a temporary phenomenon – mainly the result of falling energy prices. But core inflation shows a similar trend, falling from two per cent at end-2011 to 1.1 per cent in April 2014. More worryingly, inflation expectations (according to the ECB survey of professional forecasters) have also been falling recently: in Q2 2014, the two-year ahead mean forecast is now just 1.4 per cent (compared to 1.9 per cent in 2011). Even the five-year forecast, which has been well anchored at two per cent for a long time, recently declined to 1.8 per cent. Some argue that falling prices can be a good thing, allowing us simply to buy more stuff. Others warn of the risk of a negative deflationary spiral, driving the euro area into a great depression similar to that observed in the early 1930s, with consumers anxiously postponing consumption and firms cutting down on investment, thus reinforcing an accelerating decline in the price level
Σχετικές αναρτήσεις:
- Anastasatos, T. & Stamatiou, T. (2014) “Is Deflation a Risk for Greece?“, Economy and Markets, Eurobank Research, Vol. IX, Issue 3, Απρίλιος.
- Moqhadam, R., Teja, R. and Berkmen P. (2014) “Euro Area – Deflation Versus Lowflation“, iMFdirect Blog, 4 Μαρτίου.
- Levy, M. (2014) “Clarifying the debate about deflation concerns“,VoxEU Organisation, 21 Φεβρουαρίου.