Such a compression over the period 2001-2002 would have significant deflationary effects not only on the United States and the developed countries, but also on many developing countries.
If maintained, such developments would help to maintain domestic demand and in Europe they should continue to partly offset the deflationary impact of the fiscal consolidation required by the Maastricht criteria.
Some Asian economies have experienced brief periods of deflation without widespread detrimental effects but Japan' s experience highlights the dangers of allowing deflation to become entrenched.
Romanian government confidence in continuing disinflation was underscored by its currency revaluation in 2005, making 10,000"old" lei equal 1"new" leu.
Although the advanced economies may experience a short period of deflation during 2009, this is unlikely to persist because of its origin in unrepeated declines in world commodity prices.
While reversing public demand injections will be necessary at some point in the future, current indicators point to a much greater danger of deflation, which a premature reduction of public spending will only exacerbate.
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