Kondratieff Waves and Deflationary Trend in the Modern Global Economy

Saturday, 21 July 2018: 15:06
Oral Presentation
Leonid GRININ, National Recearch University Higher School of Economics, Russian Federation
Andrey KOROTAYEV, National Research University Higher School of Economics, Russia
The danger of deflation has been rather frequently mentioned recently among numerous concerns over the European and partly American economies. Analysts cite the Japanese economy which has been suffering from deflation for the last two decades despite the government's efforts. Similarly, notwithstanding many trillions of dollars, euros, and yen that were invested in economies over the past few years, the inflation in the Western countries still remains low. The reason for disinflation at the moment lies in the fact that the change in inflation and deflation over fairly long intervals is cyclical, its dynamics in long term has a shape of long waves (or cycles), which can be explained by the theory of long cycles of Nikolay Kondratieff. Each long cycle has an upswing phase and a downswing one. For upswing phases inflation trends are more typical. The deflationary and depressive tendencies increase at the downswing phases. According to our estimations after the 2008 global economic crisis the 5th K-wave downswing began. It will continue till the mid-2020s, and the problem of deflation, apparently, will be quite serious till that time. There are also other reasons why European countries suffer from low inflation and deflation tendencies. The USA, albeit to a lesser extent, has signs of the disease as well. The present paper defines reasons of the problem, explains the peculiarities of the inflation-deflation processes in the world and also offers some forecasts on this basis. Based on our analysis of available resources and the theory of long cycles, we suppose that the new crisis will begin in 2018–2019. We also suppose that in the next 5–10 years, the global economy will continue being in the crisis-depression phase with rather sluggish and weak rises.