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Is Price Stability Enough?

22 Pages Posted: 20 Sep 2007  

William R. White


Date Written: April 2006


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.

Keywords: financial stability, economic policy, price stability

JEL Classification: E44, E50, E60

Suggested Citation

White, William R., Is Price Stability Enough? (April 2006). BIS Working Paper No. 205. Available at SSRN: or

William R. White (Contact Author)


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