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Perils of Price Deflation: An Analysis of the Great Depression

"Perils of Price Deflation: An Analysis of the Great Depression" examines the effect that price deflation had on output during the Great Depression and considers whether the sporadic deflation that might accompany a zero inflation target could have similarly devastating effects in the future.
  1. What are the three potential dangers of price deflation? How do they affect real economic activity?

  2. How do Carlstrom and Fuerst assess the role of price deflation and its dangers during the Great Depression of 1929-1933?

  3. Should policymakers be concerned with the threat of price deflation today? Why?
Source: "Perils of Price Deflation: An Analysis of the Great Depression." Charles T. Carlstrom and Timothy S. Fuerst, Federal Reserve Bank of Cleveland Economic Commentary, February 15, 2001, pp. 1-4.


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