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Disinflations in Latin America and the Caribbean: A free lunch?

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  • Hofstetter, Marc

Abstract

This paper challenges the conventional view according to which disinflations in Latin America - even from low and moderate peaks - have been carried out at no cost to output. After suggesting a new methodology that overcomes some of the shortcommings of the traditional methods used to measure the costs of disinflations, large sacrifice ratios are obtained for the 1970s and 1980s. While the disinflation costs for the 1990s remain negative, it is shown that an unusual combination of circumstances - i.e., factors related to capital inflows, structural reforms, and the peculiar recent inflation history - can explain this fortunate result.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 1 (March)
Pages: 327-345

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:1:p:327-345

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Web page: http://www.elsevier.com/locate/inca/622617

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References

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Citations

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Cited by:
  1. Mazumder, Sandeep, 2014. "The sacrifice ratio and core inflation," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 400-421.
  2. Marc Hofstetter, 2007. "Disinflating From Moderate Inflation," DOCUMENTOS CEDE 002373, UNIVERSIDAD DE LOS ANDES-CEDE.
  3. Marc Hofstetter, 2008. "Sticky Prices and Moderate Inflation," DOCUMENTOS CEDE 005856, UNIVERSIDAD DE LOS ANDES-CEDE.
  4. Mazumder, Sandeep, 2014. "Determinants of the sacrifice ratio: Evidence from OECD and non-OECD countries," Economic Modelling, Elsevier, vol. 40(C), pages 117-135.
  5. Bowdler, Christopher & Nunziata, Luca, 2010. "Labor market structures and the sacrifice ratio," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 816-826, September.
  6. Andrés Gonzalez & Franz Hamann, 2011. "Lack of Credibility, Inflation Persistence and Disinflation in Colombia," REVISTA DESARROLLO Y SOCIEDAD, UNIVERSIDAD DE LOS ANDES-CEDE.
  7. Marc Hofstetter, 2006. "La política monetaria y la Corte Constitucional: el caso del salario mínimo," Revista de Economía Institucional, Universidad Externado de Colombia - Facultad de Economía, vol. 8(14), pages 105-124, January-J.
  8. Nicolás De Roux & Marc Hofstetter, 2012. "Sacrifice Ratios and Inflation Targeting: The Role of Credibility," DOCUMENTOS CEDE 009325, UNIVERSIDAD DE LOS ANDES-CEDE.

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