Disinflation

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Disinflation

A decrease in the rate of inflation.

Disinflation

A situation in which the inflation rate decreases, but does not reverse. For example, disinflation occurs when the inflation rate goes from 5% to 2%. Importantly, it is not deflation when the inflation rate becomes negative. Disinflation is considered a normal and healthy part of a business cycle.

disinflation

A slowdown in the rate of inflation. A drop in the inflation rate from 3% in one year to 2% in the next year is an example of disinflation. On an overall basis, disinflation is good for security prices, but it can be painful for individual companies that have made investment and borrowing decisions based upon a belief that a high rate of inflation would continue. See also inflation.

Disinflation.

Disinflation is a slowdown in the rate of price increases that historically occurs during a recession, when the supply of goods is greater than the demand for them.

Unlike deflation, however, when prices for goods actually drop, disinflation prices do not usually fall, but the rate of inflation becomes negligible.

disinflation

a fall in the general price level, frequently accompanied by a reduction in the level of national income (DEFLATION). A disinflation is often deliberately brought about by the authorities in order to combat INFLATION and to eliminate a BALANCE OF PAYMENTS deficit. Instruments of disinflationary policy include fiscal measures (e.g. tax increases), monetary measures (e.g. higher interest rates), and prices and income controls. See FISCAL POLICY, MONETARY POLICY, PRICES AND INCOME POLICY, INFLATIONARY GAP, INTERNAL-EXTERNAL BALANCE MODEL.
References in periodicals archive ?
The differing patterns among these various measures suggest that comparisons between the 2010 disinflation and today's disinflation might benefit from digging into the details.
Erceg and Levin (2003), in another influential paper, studied the episode of the Volcker disinflation in the US using a model in which agents learn about the ultimate intentions of the central bank.
This paper's empirical method allows us to measure the sacrifice ratio as the costs of a deliberate disinflation policy in contrast to, for example, the output costs of a series of negative cost push shocks.
Disinflations for each country are identified as follows.
With results similar to ours, Balvers and Cosimano (1994) find that rapid disinflation is preferred when inflation is high, although in their framework rapid reduction in money growth is warranted to facilitate learning.
If we think of the period as six months, then fully credible disinflations spread out over a year or more will not have negative output effects.
8 The timing and extent of disinflation were, of course, always somewhat uncertain, and some financial distress did occur during postwar disinflations.
Prediction 4 is the distinct statement that if the monetary policymaker is more credible, taking that credibility as fixed, speedier disinflations should occur.
In particular, the evidence has implications for traditional views on the output cost of fighting inflation, the timing and speed of deliberate disinflations, the benefits of preemptive monetary policy, and the merits of monetary policy experimentation.
Theoretically, positive surprises should raise output just as negative surprises reduce it; announced disinflations should not reduce output on average.
These papers discuss the two most dramatic disinflation programs in West Europe.
In a disinflation process, this means that the CB may be too timid in fighting inflation in the presence of shocks that appreciate the currency in real terms.