This will result in unsound investments and wider fluctuations in the economy. It is also important to avoid deflation, a fall in prices, because this often accompanies and can amplify a downturn. Low and stable inflation provides households and enterprises with a clear indication of changes in relative prices. This makes it easier to make the right decisions and contributes to price stability in financial and property markets. This is the best contribution monetary policy can make to economic growth and stability. A number of studies have looked at the effects of high inflation on the real economy, see for example references in Qvigstad and Røisland (2000). We have had four periods of very high inflation over the past 100 years: during the two world wars; the Korean War and a 15-year period from the first half of the 1970s to the second half of the 1980s. In Norway, very high inflation is a wartime phenomenon and a 1970s and 1980s phenomenon. Substantial real economic losses and financial instability have followed in its wake. Inflation was a costly affair. BIS Review 59/2002  1  The fourth period of high inflation was unlike the three previous periods. In the 1970s and 1980s, inflation accelerated gradually. It was not as high as during the two world wars, but it took a long time for the level to fall. The fixed exchange rate system of the post-war period, the Bretton Woods system, broke down in 1971.
Denis Beau: The Euro area sovereign debt markets in the crisis role and impact on financial stability perspectives Speech by Mr Denis Beau, First Deputy Governor of the Bank of France, at the Risk Live 2021, 7 June 2021. * * * The demand and supply environment in which European sovereign debt markets operate has changed over the last years and is still changing: 1. Firstly, liquidity in the financial system has increased, both in terms of excess reserves held by commercial banks and deposits held by the non-financial sector, notably corporates, whose considerable increase in gross debt has so far largely been offset by a similar rise of liquid assets on aggregate; 2. Secondly, central banks have strengthened their presence in the secondary sovereign debt market. This is a common and global feature. The Eurosystem for instance, has reinforced its accommodative policy stance notably by stepping up its asset purchases of public sector securities under the pandemic emergency purchase programme (PEPP) while continuing those under the asset purchase programme (APP). This implies that a large proportion of the stock of some governments’ debt -for the major currencies- is currently held by central banks; 3. A third obvious factor lies in the significant increase in sovereign debt issuances since last year, as European countries implemented substantial fiscal measures to cushion the economic impact of the Covid crisis and foster a subsequent recovery. All in all, euro area governments issued close to EUR 1 trillion in net debt in 2020.