Deflation and Its Implications for Macroeconomic Stability in Europe

Deflation has been a hot topic of discussions since 2001 and still represents an important concern driven by the fear of consequences. Also deflation is one of the least-understood economic environments for investors, yet one of the most potentially devastating to the unprepared. It occurs when the level of prices is decreasing during the time, and money become more valuable than the rest of goods in the economy of a country, also it reduce aggregate demand and negatively influence on profitability. The book deals with the relationship between overall price changes and economic growth in Europe. Analyzing this relationship, I found out that using a restricted data set, inflation turns out to be significant for GDP growth while deflationary periods lack this significance.