Abstract:

This article provides a Czech and European overview of the inflation versus deflation debate which has captured the attention of the economics profession in the years following the US housing bubble. Euro area annual inflation was -0.2 % in February 2016, down from 0.3 % in January 2016. A year earlier, the rate was -0.3 %. Deflation can be, under certain conditions, for the real economy significantly greater threat than classic inflation as we know it. There is therefore not deflation as deflation. A mere drop in prices is not yet a problem. Problems occur in a situation where there is a decline in prices caused by a decrease in the volume of money in the economy, a credit contraction and similar phenomena. A similar situation is always connected with the economic recession and all negative phenomena that accompany it. The development of inflation in the Czech Republic and in the European Union will depend on the further economic development of important macroeconomic indicators (mainly GDP). The goal of this paper is evaluation of the current economic situation in the Czech Republic and in the EU with regard to the inflation.