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Deflation: pros, cons, Japan case
Module 1
Empirical Frameworks for Deflation Analysis
1
Analyzing US CPI: Deflation and Disinflation
Write a Python script to download post-WWII US CPI data, then programmatically identify and plot periods of deflation and disinflation.
Write a Python script to download post-WWII US CPI data, then programmatically identify and plot periods of deflation and disinflation.
2
Understanding Price Indices and Deflation Measurement
Critically evaluate the construction and limitations of common price indices (e.g., CPI, GDP deflator) and the impact of measurement biases on identifying deflation.
Critically evaluate the construction and limitations of common price indices (e.g., CPI, GDP deflator) and the impact of measurement biases on identifying deflation.
3
Testing Velocity Stability During Deflation
Empirically test the stability of the velocity of money (V) in the Quantity Theory of Money (MV=PY) using data from a major deflationary period.
Empirically test the stability of the velocity of money (V) in the Quantity Theory of Money (MV=PY) using data from a major deflationary period.
4
Real Interest Rates in Deflation: A Fisher Equation Analysis
Calculate and analyze the behavior of ex-post real interest rates during a deflationary period using the Fisher Equation and historical data.
Calculate and analyze the behavior of ex-post real interest rates during a deflationary period using the Fisher Equation and historical data.
5
Identifying Liquidity Traps: An IS-LM Approach
Formulate empirical criteria for identifying a liquidity trap based on the IS-LM framework, focusing on the zero lower bound and interest elasticity of money demand.
Formulate empirical criteria for identifying a liquidity trap based on the IS-LM framework, focusing on the zero lower bound and interest elasticity of money demand.
Module 2
The Deflation Debate and Historical Precedent
6
Deflation: Good vs. Bad
Analyze the distinction between 'good' (supply-side) and 'bad' (demand-side) deflation, evaluating historical case studies of productivity-driven price decreases.
Analyze the distinction between 'good' (supply-side) and 'bad' (demand-side) deflation, evaluating historical case studies of productivity-driven price decreases.
7
Arguments Against Deflation
Critically evaluate the primary arguments against deflation, including deferred consumption, wage rigidity, and Irving Fisher's 'debt-deflation' spiral.
Critically evaluate the primary arguments against deflation, including deferred consumption, wage rigidity, and Irving Fisher's 'debt-deflation' spiral.
8
The Great Depression: A Timeline of Deflation and Economic Decline
Describe the timeline of the Great Depression (1929-1939), charting key macroeconomic indicators (GDP, unemployment, price level) to isolate the deflationary period.
Describe the timeline of the Great Depression (1929-1939), charting key macroeconomic indicators (GDP, unemployment, price level) to isolate the deflationary period.
9
Deflation's Grip: Debt-Deflation and the Great Depression
Analyze the primary channels through which deflation exacerbated the Great Depression, with a specific focus on the debt-deflation mechanism.
Analyze the primary channels through which deflation exacerbated the Great Depression, with a specific focus on the debt-deflation mechanism.
Module 3
Case Study: Japan's Deflationary Era
10
Japan's Bubble Economy and Lost Decades
Describe the macroeconomic conditions in Japan leading up to its 'lost decades,' focusing on the asset price bubble of the late 1980s.
Describe the macroeconomic conditions in Japan leading up to its 'lost decades,' focusing on the asset price bubble of the late 1980s.
11
Japan's Deflationary Journey: 1990-Present
Chart the timeline of Japan's deflation from 1990 to the present, identifying distinct phases using core CPI and real GDP growth data.
Chart the timeline of Japan's deflation from 1990 to the present, identifying distinct phases using core CPI and real GDP growth data.
12
Japan's Deflation: Policy Responses and Timeline
Map the major monetary and fiscal policy responses to the corresponding phases of Japan's deflationary timeline.
Map the major monetary and fiscal policy responses to the corresponding phases of Japan's deflationary timeline.
13
Japan's Monetary Policy: ZIRP and QE Effectiveness
Evaluate the effectiveness of Japan's monetary policy responses, including Zero Interest-Rate Policy (ZIRP) and Quantitative Easing (QE).
Evaluate the effectiveness of Japan's monetary policy responses, including Zero Interest-Rate Policy (ZIRP) and Quantitative Easing (QE).
14
Japan's Liquidity Trap: An Empirical Assessment
Critically assess the argument that Japan was in a liquidity trap, using the empirical criteria developed earlier to analyze relevant data.
Critically assess the argument that Japan was in a liquidity trap, using the empirical criteria developed earlier to analyze relevant data.
Module 4
Confounding Variables in the Japanese Case
15
Japan's 1990s Banking Crisis: Credit Crunch and Lasting Impact
Examine the role of Japan's 1990s banking crisis and its long-term effects on credit creation and investment ('credit crunch').
Examine the role of Japan's 1990s banking crisis and its long-term effects on credit creation and investment ('credit crunch').
16
Japan's Zombie Firms: A Drag on Growth
Analyze the impact of 'zombie firms' on productivity, resource allocation, and economic growth in Japan during its deflationary period.
Analyze the impact of 'zombie firms' on productivity, resource allocation, and economic growth in Japan during its deflationary period.
17
Demographics and Japan's Stagnation
Investigate the role of demographic factors, such as an aging population and declining workforce, as a confounding variable in Japan's prolonged stagnation.
Investigate the role of demographic factors, such as an aging population and declining workforce, as a confounding variable in Japan's prolonged stagnation.
18
Japan's Fiscal Policy and Deflation
Analyze the effectiveness of Japan's fiscal policy measures (e.g., public works spending, consumption tax changes) as a response to deflation.
Analyze the effectiveness of Japan's fiscal policy measures (e.g., public works spending, consumption tax changes) as a response to deflation.
Module 5
Contemporary Deflationary Pressures and Policy
19
Eurozone Deflation: Causes, Crises, and ECB Responses Post-2008
Analyze the causes and policy responses to deflationary pressures in the Eurozone post-2008, focusing on the sovereign debt crisis and ECB actions.
Analyze the causes and policy responses to deflationary pressures in the Eurozone post-2008, focusing on the sovereign debt crisis and ECB actions.
20
Japan and Eurozone Deflation: A Comparative Analysis
Compare and contrast the deflationary episodes of Japan and the Eurozone, evaluating the relative importance of demographics, banking sector health, and institutional constraints.
Compare and contrast the deflationary episodes of Japan and the Eurozone, evaluating the relative importance of demographics, banking sector health, and institutional constraints.
21
Sweden's NIRP: Rationale and Impact (2010s)
Analyze the case of Sweden in the 2010s, evaluating the rationale and impact of implementing negative interest rates (NIRP) to combat low inflation.
Analyze the case of Sweden in the 2010s, evaluating the rationale and impact of implementing negative interest rates (NIRP) to combat low inflation.
22
Unconventional Monetary Policies: Challenges and Consequences
Evaluate the challenges and potential unintended consequences of unconventional monetary policies (QE, NIRP, forward guidance) used to combat deflation.
Evaluate the challenges and potential unintended consequences of unconventional monetary policies (QE, NIRP, forward guidance) used to combat deflation.
Module 6
Synthesis
23
Deflation in Japan: Inevitable or Policy-Driven?
Synthesize the evidence from all case studies to form a nuanced conclusion on whether the negative outcomes in Japan were an inevitable consequence of deflation or primarily driven by policy choices and confounding factors.
Synthesize the evidence from all case studies to form a nuanced conclusion on whether the negative outcomes in Japan were an inevitable consequence of deflation or primarily driven by policy choices and confounding factors.