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Inflation, Disinflation, Deflation: What Awaits after Coronavirus? Lessons from World War II

45 mins.
25 JUNE, 2020
Leopoldo Torralba Torralba
Ignacio de la Torre De la Torre
Joaquín Rivera Rivera
Monetary Policy Spain Global US Europe China UK AER Global AER Personal
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A major crisis has many material economic side effects. A widespread concern is how to pay off the enormous quantities of public debt governments are generating to combat it. The answer to this question relates to an additional medium-term effect: inflation and its sharp fluctuations. The hyper-expansive fiscal and monetary policies implemented by countries today are partially reminiscent of what happened during and after World War II, after which inflation ups and downs were exceptional.
What is the most likely scenario in the long term: deflation, disinflation, inflationary acceleration or hyperinflation?
What are the parallels between the monetary and fiscal situation of the World Wars and the present crisis?
What are the main driving forces of future inflation, contextual and structural, before and after the coronavirus?
What are the assets that behaved best in the period since 1945?

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