Deflation as Seen by Consumers
| Authors | |
|---|---|
| Year of publication | 2016 |
| Type | Article in Proceedings |
| Conference | Book of Abstracts of the 19th International Scientific Conference AMSE 2016 |
| MU Faculty or unit | |
| Citation | |
| Web | http://amse.umb.sk/abstracts.html |
| Field | Economy |
| Keywords | Consumer prices; deflationary spiral; expectations; inflation; Ireland |
| Description | The Great Recession has re-established discussion on the causes and consequences of deflation. Especially central bankers across the European Union started to warn about the threat of a deflationary spiral. Deflation has a negative impact particularly on the public finance of heavily indebted European governments. In this contribution we have analysed consumers’ expectations in a deflationary environment. The aim of this paper is to analyze consumers’ expectations in a deflationary environment using data from Consumer Expectations Survey conducted by the Directorate General for Economic and Financial Affairs as well as data on rates of inflation published by the Organisation for Economic Co-operation and Development were used. We have found that European consumers consider consumer’s prices as growing even during a deflation. Consumers are incompetent in predicting a future deflation. Current deflation does not help consumers to expect deflation in the following year. The severest deflation during the Great Recession was experienced in Ireland. However, there was a drawdown primarily in the Irish spending on durable-goods. The decrease of spending on non-durable goods was just modest, spending on services remained stable and spending on semi-durable goods actually grew. Based on the results of our analysis, we might conclude, that there is no evidence of a deflationary spiral. |
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