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Tag Archives: Deflation

A Field Guide to Exchange Rate Regimes in Central, Eastern and Southeastern Europe

By Philip Gerson and Johannes Wiegand For an economist interested in examining the evolution of monetary and exchange rate regimes, Central, Eastern and Southeastern Europe (CESEE) provides a habitat of unparalleled diversity. Almost every type of regime can be found in the region: from floating and inflation targeting over various pegs to the unilateral use of the euro and full euro area membership. Why do CESEE’s monetary regimes differ so much from one another, and how have they...

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Can Raising Japan’s Minimum Wage Accelerate Wage Growth?

By Luc Everaert and Giovanni Ganelli Japan’s minimum wage is 798 JPY ($6.52) per hour, lower than many other advanced countries, including the United States, and among the lowest relative to the average wage (see chart). For a country that needs consumers to boost spending to pull the economy out of 15 years of deflation and reinvigorate growth, a hike in wages across the board can go a long way. This is especially the case for Japan, where there is a deep-rooted deflationary mindset and a...

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The Lowdown on U.S. Core Inflation

By Yasser Abdih There was a time when U.S. central bankers worried that inflation was too high, and they tried to bring it down. Now the opposite is true: the Federal Reserve is concerned that inflation has remained stubbornly low, and it’s trying to boost prices. The reason: persistently low inflation raises the risk that prices will actually start to decline, a dangerous condition known as deflation. That’s bad news because it makes people less willing to borrow and spend—anticipating lower...

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Japan: Time to Load a Fourth Arrow—Wage Increases

By Luc Everaert and Giovanni Ganelli (Version in 日本語) Everybody agrees: wages need to grow if Japan is to make a definite escape from deflation. Full- time wages have increased by a mere 0.3 percent since 1995! For example, despite its record profits, Toyota increased its base salary only by 1.1 percent last year. The average of 219 Keidanren firms managed just 0.44 percent. Clearly, an increase in base wages, colloquially referred to as “base up”, is long overdue. For quite some time now,...

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The Quest for Robust and Synchronized Growth

(Versions in Español, عربي, 中文, Français, Русский and 日本語) Today, we released the October 2015 World Economic Outlook. Our forecasts come at a moment when the world economy is at the intersection of at least three powerful forces. First, China’s economic transformation – away from export- and investment-led growth and manufacturing, in favor of a greater focus on consumption and services. This process, however necessary and healthy in the longer term, has near-term implications for China’s...

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Japan’s inflation expectations: glass half empty?

“Inflation expectations appear to be rising on the whole.” Check out the last 11 policy statements from the Bank of Japan: you’ll find the same line, an upgrade from a milder assertion about “some indicators” last July. But according to the second round of the BoJ’s survey of companies’ expectations for price rises – the grand-sounding “inflation outlook of enterprises”, published on Wednesday – expectations are not rising. If anything, they’re falling. This was not supposed to happen. The...

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