Recurrent High Inflation and Stabilization: A Dynamic Game
AbstractThe authors analyze the dynamics of inflation that arise from fiscal deficits caused by the noncooperative behavior of interest groups. The 'state' variable is the degree of financial adaptation, a proxy for the share of wealth agents hold in alternatives to domestic currency. As financial adaptation becomes widespread, the costs of financing a given budget deficit rise. In this context, there can be fully rational cycles of increasing inflation and financial adaptation, followed by stabilization and remonetization. The model seems applicable to the experience of many Latin American countries. Copyright 1996 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 37 (1996)
Issue (Month): 4 (November)
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Other versions of this item:
- Guillermo Mondino & Federico Sturzenegger & Mariano Tommasi, 1992. "Recurrent High Inflation and Stabilization, A Dynamic Game," UCLA Economics Working Papers 678, UCLA Department of Economics.
- Mariano Tommasi & Guillermo Mondino & Federico Sturzenegger, 1995. "Recurrent High Inflation and Stabilization: A Dynamic Game," Working Papers 10, Universidad de San Andres, Departamento de Economia, revised Nov 1996.
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