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Die Kosten von Deflation: Eine historische Analyse

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Abstract

During the last ten years, Swiss consumer prices have been mostly declining. This begs the question whether deflation, i.e. a general decline in the aggregate price level, has a detrimental impact on real activity. Existing empirical studies for the 19th and early 20th century suggest that most deflations were surprisingly benign and were associated with relatively robust GDP growth. This finding, however, may be an artifact of measurement error in historical consumer price data. The present study shows that, because of measurement error, we systematically underestimate the detrimental impact of deflation on real activity. After applying an appropriate estimation method, which controls for measurement error in the price data, I find that deflations were accompanied by significantly lower GDP and industrial production growth. For the current Swiss situation this suggests that, while deflation cannot be equated with depression under all circumstances, the real economy would have suffered less without the recent decline in the general level of prices.

Suggested Citation

  • Daniel Kaufmann, 2016. "Die Kosten von Deflation: Eine historische Analyse," KOF Analysen, KOF Swiss Economic Institute, ETH Zurich, vol. 10(4), pages 45-54, December.
  • Handle: RePEc:kof:anskof:v:10:y:2016:i:4:p:45-54
    DOI: 10.3929/ethz-a-005427569
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    More about this item

    Keywords

    Deflation; measurement error; monetary history; instrumental variables;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • N1 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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