1 April 2006

“Is Price Stability Enough? BIS Working Papers No 205:

Contribution to the “Festschrift Die Schweizerische Nationalbank 1907 2007

(commemorative publication ” The Swiss National Bank 1907-2007)


No one in the industrial countries should now question the substantial economic benefits associated with reducing inflation from earlier, high levels. At the same time, history also teaches that the stability of consumer prices might not be sufficient to ensure macroeconomic stability. Past experience is replete with examples of major economic and financial crises that were not preceded by inflationary pressures. Conversely, history shows that many periods of deflation, based on rising productivity, were simultaneously characterised by rapid growth. Recent structural changes in the global economy imply that this history might have more contemporaneous relevance than is commonly thought. If so, the implication is that policies directed to the pursuit of price stability might have to be applied more flexibly and with a longer-run focus than has recently been the case.

Publication:  Bank For International Settlements Date:  1 April 2006 work205.Is Price Stability Enough.pdf