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Disinflations In Latin America And The Caribbean: A Free Lunch?

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  • Marc Hofstetter

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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 shortcomings of the traditional methods used to measure the costs of disinflations, large sacrifice ratios are obtained for the 1970s and 80s. While the disinflation costs for the 90s 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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File URL: http://economia.uniandes.edu.co/publicaciones/d2006-04.pdf
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Bibliographic Info

Paper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 002375.

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Length: 27
Date of creation: 10 Jan 2006
Date of revision:
Handle: RePEc:col:000089:002375

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Keywords: Inflation; Growth; Disinflation costs; Sacrifice Ratios; Latin America;

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References

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  3. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1992. "Capital Inflows and Real Exchange Rate Appreciation in Latin America," MPRA Paper 13843, University Library of Munich, Germany.
  4. Lawrence Huiyan Zhang, 2001. "Sacrifice Ratios with Long-Lived Effects," Economics Working Paper Archive 446, The Johns Hopkins University,Department of Economics.
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  8. Sánchez, Óscar & Seade, Juan & Werner, Alejandro, 2001. "Los costos asociados al proceso desinflacionario," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(270), pages 157-194, abril-jun.
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  28. repec:nbr:nberre:0126 is not listed on IDEAS
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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. Nicolás De Roux & Marc Hofstetter, 2012. "Sacrifice Ratios and Inflation Targeting: The Role of Credibility," DOCUMENTOS CEDE 009325, UNIVERSIDAD DE LOS ANDES-CEDE.
  3. Bowdler, Christopher & Nunziata, Luca, 2010. "Labor market structures and the sacrifice ratio," Journal of Macroeconomics, Elsevier, vol. 32(3), pages 816-826, September.
  4. Andrés González & Franz Hamann, . "Lack of Credibility, Inflation Persistence and Disinflation in Colombia," Borradores de Economia 658, Banco de la Republica de Colombia.
  5. Marc Hofstetter, 2008. "Sticky Prices and Moderate Inflation," DOCUMENTOS CEDE 005856, UNIVERSIDAD DE LOS ANDES-CEDE.
  6. Marc Hofstetter, 2007. "Disinflating From Moderate Inflation," DOCUMENTOS CEDE 002373, UNIVERSIDAD DE LOS ANDES-CEDE.
  7. Mazumder, Sandeep, 2012. "Determinants of the Sacrifice Ratio: Evidence from OECD and non-OECD countries," Working Papers 106, Wake Forest University, Economics Department.
  8. 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.

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