Determinants of Deflation in Hong Kong SAR

December 1, 2003

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Papa M N'Diaye. Determinants of Deflation in Hong Kong SAR, (USA: International Monetary Fund, 2003) accessed December 26, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper presents a comprehensive econometric analysis of the determinants of deflation in Hong Kong SAR. The analysis helps to determine the relative contributions of factors such as increased productivity, scarce money supply, and excess capacity in determining deflation. The main conclusion is that the effects of permanent shocks, such as productivity shocks and shocks related to changes in the money supply and price convergence with trading partners, have become more important in explaining deflation. In addition, the effects of temporary shifts in aggregate demand have been perpetuated by negative wealth and balance-sheet effects in the corporate and household sectors arising from asset-price declines over the past five years.

Subject: Asset prices, Consumer price indexes, Deflation, Monetary base, Money, Prices, Production, Productivity

Keywords: Aggregate demand, Aggregate demand demand shock, Aggregate-demand perspective, Asset prices, Consumer price indexes, Convergence shock, Cost-push shock, Deflation, Durable goods, Monetary base, Price, Price level, Productivity, Productivity shock, Structural VAR, WP

Publication Details

Pages:

28
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/250
Stock No:

WPIEA2502003
ISBN:

9781451875911
ISSN:

1018-5941

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