Deflation is a sustained decrease in the general price level. It is different from disinflation, which is a slowdown in the rate of inflation.

Deflation can be benign when it comes from productivity gains. It can be harmful when it interacts with high nominal debt: falling prices and incomes raise the real debt burden, forcing borrowers to cut spending and sell assets, which can push prices down further.[1]

The IMF has studied the determinants and risks of deflation and the policy options available.[2]

Sources

  1. Fisher, Irving. The Debt-Deflation Theory of Great Depressions. Econometrica. 1933. View source Accessed Nov 11, 2026.
  2. International Monetary Fund. Deflation: Determinants, Risks, and Policy Options. IMF. 2003. View source Accessed Nov 11, 2026.