Disinflation and the Recession-Now-Versus-Recession-Later Hypothesis: Evidence from Uruguay
AbstractBoth analytical models and casual empiricism suggest that the timing of the recessionary costs associated with inflation stabilization in chronic inflation countries may depend on the nominal anchor that is used. Under money-based stabilization, the recession occurs at the beginning of the program, while under exchange-rate-based stabilization the recession occurs later in the program. This paper provides a first attempt to formally test this hypothesis using a vector-autoregression model for Uruguay. The impulse response of output to different stabilization policies is broadly consistent with the "recession-now-versus-recession-later" hypothesis.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 95/99.
Date of creation: 01 Oct 1995
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- Alexander W. Hoffmaister & Carlos A. VÃ©gh, 1996. "Disinflation and The Recession-Now-versus-Recession-Later Hypothesis: Evidence from Uruguay," IMF Staff Papers, Palgrave Macmillan, vol. 43(2), pages 355-394, June.
- E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
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