Editing Reflation

{{Short description|Term in economics}}
'''Reflation''' is used to describe a return of prices to a previous rate of inflation. One usage describes an act of [[economic stimulus|stimulating]] the [[economy]] by increasing the [[money supply]] or by reducing [[taxes]], seeking to bring the economy (specifically the price level) back ''up'' to the long-term trend, following a dip in the [[business cycle]]. It is the opposite of [[disinflation]], which seeks to return the economy back ''down'' to the long-term trend.<ref>{{cite web |title=Report: Reflation Risk |url=https://www.goldmansachs.com/insights/pages/reflation-risk.html |publisher=[[Goldman Sachs]] |access-date=8 June 2021 |date=7 April 2021}}</ref><ref name="MBN">{{cite web |title=What is reflation? Definition and meaning |url=https://marketbusinessnews.com/financial-glossary/reflation-definition-meaning/ |website=Market Business News |access-date=8 June 2021}}</ref>

==Overview==
In this perspective, reflation, is contrasted with inflation (narrowly speaking) ''above'' the some long-term trend line, while reflation is a recovery of the price level when it has fallen ''below'' the trend line.<ref>{{cite web |title=Position for reflation |url=https://www.ubs.com/global/en/wealth-management/chief-investment-office/investment-opportunities/key-investment-ideas/2021/position-for-reflation.html |publisher=[[UBS]] |access-date=8 June 2021 |language=en}}</ref><ref name="SMH">{{cite web |last1=Parkes |first1=Graham |title=What is a 'reflation trade' and why is it important to investing? |url=https://www.smh.com.au/money/investing/what-is-a-reflation-trade-and-why-is-it-important-to-investing-20210223-p57543.html |website=[[The Sydney Morning Herald]] |access-date=8 June 2021 |language=en |date=2021-02-23}}</ref> For example, if inflation had been running at a 3% rate, but for one year it falls to 0%, the following year would need 6% inflation (actually 6.09% due to compounding) to catch back up to the long-term trend. This higher than normal inflation is considered reflation, since it is a return to trend, not exceeding the long-term trend. 

This distinction is predicated on a theory that [[economic growth]], where there is long-term growth in the economy and price level, is both sustainable and desirable. Just as [[disinflation]] is considered an acceptable antidote to high inflation, reflation is considered to be an antidote to [[deflation]] (which, unlike inflation, is considered bad regardless of its magnitude).

Reflation has also found usage in forensic economics to describe a return to monopolistic (exorbitant) price paths following correction. Inflation can be regarded as expansion of prices beyond previous levels, while reflation can describe return to a previous pricing strategy.

== Policy ==
{{see|Economic stimulus}}
The term "reflation" can also refer to an [[economic policy]] whereby a government uses fiscal or monetary stimulus in order to expand a country's output.  This can possibly be achieved by methods that include reducing tax, changing the money supply, or even adjusting [[interest rate]]s.<ref>{{cite web |title=Global Reflation Continues |url=https://www.morganstanley.com/im/publication/insights/investment-insights/ii_globalreflationcontinues_us.pdf |publisher=[[Morgan Stanley]] |access-date=8 June 2021 |date=March 2017}}</ref>

Originally, it was used to describe a recovery of price to a previous desirable level after a fall caused by a recession. Today it also (in addition to the above) describes the first phase in the recovery of an economy which is beginning to experience increasing prices at the end of a slump. With rising prices, employment, output and income also increase till the economy reaches the level of [[full employment]].<ref>{{cite web |last1=Baker |first1=Jonathan |title=The Reflation Trade: What Is It? |url=https://www.bdfllc.com/knowledge-center/wealth-watch-newsletter/the-reflation-trade-what-is-it/ |publisher=BDF LLC (BDF) |access-date=8 June 2021 |date=14 January 2021}}</ref>

==See also==
*[[Economic bubble]]
*[[Inflationism]]

==References==
{{Reflist}}

==External links==
*{{cite web |first=Ray |last=Dalio |authorlink=Ray Dalio |date=September 22, 2013 |title=How The Economic Machine Works |url=https://www.youtube.com/watch?v=PHe0bXAIuk0  |archive-url=https://ghostarchive.org/varchive/youtube/20211213/PHe0bXAIuk0 |archive-date=2021-12-13 |url-status=live|via=[[YouTube]] }}{{cbignore}}

{{Economics}}

[[Category:Inflation]]
[[Category:Economic bubbles]]
[[Category:Macroeconomic policy]]

{{macroeconomics-stub}}