In the study of economics, it was Marx who put forward the problem of deflation earlier. In his theory of capital contraction and deflation, he repeatedly analyzed the expansion and contraction of money in circulation. It is believed that inflation and deflation may be caused by the industrial cycle of the economy, changes in the quantity and price of commodities in circulation, changes in the speed of money circulation and technical factors.
After Marx, it was Keynes who discussed deflation and monetary policy. In his masterpiece "General Theory of Employment, Interest and Money", Keynes used more terms such as underemployment and insufficient effective demand in the analysis of deflation. Through incisive analysis of the great crisis in 1930s, he put forward the conclusion that insufficient effective demand is the fundamental cause of deflation.
Extended data 1. cause
1. Tight monetary and fiscal policies
If a country adopts tight monetary and fiscal policies and reduces money supply, public expenditure and transfer payments, it will lead to an imbalance between the commodity market and the money market, resulting in "too many commodities pursuing too little money", which will lead to deflation with tight policies.
2. Changes in the economic cycle
When the economy reaches the peak stage of prosperity, due to a large surplus of production capacity and oversupply of commodities, prices will continue to fall, leading to periodic deflation.
3. The effective demand for investment and consumption is insufficient.
When people expect the real interest rate to fall further and the economic situation continues to be poor, the demand for investment and consumption will decrease, and the decrease in total demand will lead to the decline in prices, thus generating demand-driven deflation.
4. Adopting new technologies and improving labor productivity
Due to technological progress and the wide application of new technologies in production, labor productivity will be greatly improved, production costs will be reduced, and commodity prices will fall, resulting in cost-cutting deflation.
5. Institutions and institutional factors
Institutional changes (enterprise system, security system, etc.). ) will generally upset people's stability expectations. If people expect that income will decrease and expenditure will increase in the future, then people will "spend less and save more", resulting in insufficient effective demand and falling prices, which will lead to deflation of institutional variables.
6. Defects of exchange rate system
If a country implements the linked exchange rate system linked to a strong currency, its currency will be overvalued, which will lead to a decline in exports, a surplus of domestic commodities, difficulties in business operation, a decrease in social demand and a continuous decline in prices, thus forming the external impact of deflation.
Baidu encyclopedia-deflation
Baidu encyclopedia-economic deflation