The Benefits of Crisis for Economic Reforms
AbstractThis paper presents a model in which economic crises have positive effects on welfare. Periods of very high inflation create the incentive for the resolution of social conflict and thus facilitate the introduction of economic reforms and the achievement of higher levels of welfare. Policies to reduce the cost of inflation, such as indexation, raise inflation and delay the adoption of reforms, but have no effect on expected social welfare.
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Bibliographic InfoPaper provided by Tel Aviv in its series Papers with number 27-91.
Length: 19 pages
Date of creation: 1991
Date of revision:
Contact details of provider:
Postal: Israel TEL-AVIV UNIVERSITY, THE FOERDER INSTITUTE FOR ECONOMIC RESEARCH, RAMAT AVIV 69 978 TEL AVIV ISRAEL.
Web page: http://econ.tau.ac.il/research/foerder.asp
More information through EDIRC
social welfare ; economic reform ; economic models;
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- Alesina, Alberto & Drazen, Allan, 1991.
"Why Are Stabilizations Delayed?,"
American Economic Review,
American Economic Association, vol. 81(5), pages 1170-88, December.
- Barro, Robert J & Gordon, David B, 1983.
"A Positive Theory of Monetary Policy in a Natural Rate Model,"
Journal of Political Economy,
University of Chicago Press, vol. 91(4), pages 589-610, August.
- Robert J. Barro & David B. Gordon, 1983. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
- Laurence Ball & Stephen G. Cecchetti, 1989. "Wage Indexation and Time-Consistent Monetary Policy," NBER Working Papers 2948, National Bureau of Economic Research, Inc.
- Stanley Fischer & Lawrence H. Summers, 1990. "Should Nations Learn to Live With Inflation?," NBER Working Papers 2815, National Bureau of Economic Research, Inc.
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