Search Results for deflation


The Loop Of Debt Deflation

Monetary policy is not equipped to control the real economy and the financial economy at the same time. Its aim is to moderate the fluctuations in real variables, GDP, employment and prices. But this destabilises the financial market, fuels speculation and increases household and corporate debt with the banks.



“Deflation Remains More of a Threat to Growth Than Low Interest Rates”

Are we putting the responsilibity of exiting the crisis on central banks’ shoulders? Is ECB’s president Mario Draghi doing traders a favour by playing down the ECB’s responsibility for contributing to volatility? Professor of Financial Mathematics at Bocconi’s University Marcello Minenna answers to these questions from Milan and argues that a low interest rate environment is here to stay.



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Deflation: Economists sink into dementia

Guest post by Benjamin Cole via Historinhas | What to make of the recent dust-up around Rogoff World, in which the U.S. would pursue a cashless, deflationary federal police state characterized by negative interest rates? Harvard don Ken Rogoff has suggested this is the best macroeconomic option going forward. My take-away? The economics profession is deep into dementia.


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What if we were to see deflation?

ZURICH | UBS analysts | Our central case is that we will not have deflation in any country except for Spain in 2015. But we cannot rule out the possibility of deflation, so here we look at assets that may outperform during periods of deflation. Generally deflation is bad for equity which de-rates aggressively but the story is more nuanced because particular sectors and styles are affected quite differently.


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Eurozone: Deflation and weak activity support QE

LONDON | Barclays analysts | We believe this week’s data on inflation and economic activity have provided more arguments to step up ECB’s asset purchase programmes by including EGBs on 22 January, which is our baseline scenario. Inflation entered negative territory in December and is likely to stay negative for a few months before a weaker euro improves the inflation and growth outlook.


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The euro area’s deflation inflexion point

LONDON | By Jim McCormick and Keith Parker (Barclays) | At the start of the year, we analyzed the risks of a prolonged bout of deflation in the euro area (Japan-style deflation in Europe getting harder to dismiss). Our broad conclusion was that the risks of deflation in the euro area were probably not materially different from the risks Japan faced in the mid 1990s. Perhaps more important, we felt investors should picture 1996-97 Japan when assessing the risks of euro area deflation today.


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Deflationary risk: Which countries are most likely to be impacted?

MADRID | The Corner | In a report by Atradius Credit Insurance, they say that the disinflationary trend is visible across the Eurozone, but not all countries are expected to face the same issues. Countries that have a large output gap and those that still have to implement the most reforms will face the highest disinflationary pressure. To create a list of the countries most likely to be impacted, we first select the Eurozone markets that have a budget deficit larger than 3.0%, as these are subject to the Excessive Deficit Procedure which forces them to implement fiscal and structural reform.