TY - BOOK ID - 84783671 TI - Gauging Risks for Deflation AU - Decressin, Jörg. AU - Laxton, Douglas. PY - 2009 SN - 1462316875 1452760411 PB - Washington, D.C. : International Monetary Fund, DB - UniCat KW - Banks and Banking KW - Inflation KW - Macroeconomics KW - Price Level KW - Deflation KW - Interest Rates: Determination, Term Structure, and Effects KW - Banks KW - Depository Institutions KW - Micro Finance Institutions KW - Mortgages KW - Banking KW - Finance KW - Real interest rates KW - Central bank policy rate KW - Prices KW - Financial services KW - Asset prices KW - Interest rates KW - Banks and banking KW - United States UR - https://www.unicat.be/uniCat?func=search&query=sysid:84783671 AB - This paper discusses deflation risks and policy options. The paper highlights that slumping collateral values have exacerbated the credit crunch, and monetary policy has lost effectiveness in stabilizing output. A model-based analysis for the G3 economies (United States, euro area, and Japan) also suggests that, on the assumption that the financial distress is gradually resolved, the most likely outcome is that the global economy will stay clear of sustained deflation. However, if financial sector problems are not remedied or further shocks add to current stresses, there is a significant probability of more negative deflationary outcomes, with a deeper and more prolonged recession. The chapter underscores the crucial role of financial sector policies in remedying deflationary pressures directly and indirectly, by enhancing the effectiveness of monetary and fiscal policies. Monetary policy can help in some areas; however, supportive fiscal policies are likely to be needed to prevent a deflationary episode becoming entrenched. Monetary policy measures include operating in a broad range of financial markets to relieve credit rationing, and to lower risk spreads and term premiums. Finally, to reinforce long-run inflation expectations, central bank communications should emphasize the commitment to return inflation to objectives with all due speed. ER -