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The Dynamics of High Inflation

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  • Laurence Ball

Abstract

This paper presents a model of a high-inflation economy. The model includes the government budget constraint and money demand equation of Cagan's 1956 model; an accelerationist Phillips curve that captures inflation inertia; and an aggregate-spending equation that accounts for the effects of the inflation tax. The paper derives the dynamic effects of fiscal policy, incomes policies, and supply shocks, and uses the results to interpret high-inflation episodes of the 1970s and 1980s.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4578.

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Date of creation: Dec 1993
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Handle: RePEc:nbr:nberwo:4578

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  1. Thomas J. Sargent & Neil Wallace, 1981. "Some unpleasant monetarist arithmetic," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall.
  2. Eckstein, Zvi & Leiderman, Leonardo, 1992. "Seigniorage and the welfare cost of inflation: Evidence from an intertemporal model of money and consumption," Journal of Monetary Economics, Elsevier, vol. 29(3), pages 389-410, June.
  3. Carlos A. Végh, 1992. "Stopping High Inflation: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 626-695, September.
  4. Corbo, Vittorio & Solimano, Andres, 1991. "Chile's experience with stabilization, revisited," Policy Research Working Paper Series 579, The World Bank.
  5. De Gregorio, Jose & Guidotti, Pablo E & Vegh, Carlos A, 1998. "Inflation Stabilisation and the Consumption of Durable Goods," Economic Journal, Royal Economic Society, vol. 108(446), pages 105-31, January.
  6. Allan Drazen & Elhanan Helpman, 1986. "Inflationary Consequences of Anticipated Macroeconomic Policies," NBER Working Papers 2006, National Bureau of Economic Research, Inc.
  7. A. E. Fernández Jilberto, 1991. "Introduction," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 21(1), pages 3-9, April.
  8. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  9. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
  10. Rudiger Dornbusch & Ferico Sturzenegger & Holger Wolf, 1990. "Extreme Inflation: Dynamics and Stabilization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 1-84.
  11. Brunner, Karl & Meltzer, Allan H., 1982. "Economic policy in a world of change," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 17(1), pages 1-6, January.
  12. Carlos A. Végh Gramont, 1991. "Stopping High Inflation," IMF Working Papers 91/107, International Monetary Fund.
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Cited by:
  1. Waheed, Muhammad & Alam, Tasneem & Ghauri, Saghir Pervaiz, 2006. "Structural breaks and unit root: evidence from Pakistani macroeconomic time series," MPRA Paper 1797, University Library of Munich, Germany.
  2. Kumar Narayan, Paresh & Smyth, Russell, 2007. "Are shocks to energy consumption permanent or temporary? Evidence from 182 countries," Energy Policy, Elsevier, vol. 35(1), pages 333-341, January.
  3. Guy Debelle, 1999. "Inflation Targeting and Output Stabilisation," RBA Research Discussion Papers rdp1999-08, Reserve Bank of Australia.
  4. Cuestas, Juan Carlos & Harrison, Barry, 2010. "Inflation persistence and nonlinearities in Central and Eastern European countries," Economics Letters, Elsevier, vol. 106(2), pages 81-83, February.
  5. Aykut Kibritcioglu, 2001. "Causes of Inflation in Turkey: A Literature Survey with Special Reference to Theories of Inflation," Macroeconomics 0107002, EconWPA, revised 10 Oct 2001.
  6. Maslyuk, Svetlana & Smyth, Russell, 2009. "Non-linear unit root properties of crude oil production," Energy Economics, Elsevier, vol. 31(1), pages 109-118, January.
  7. Juan Carlos Cuestas & Barry Harrison, 2008. "Testing for stationarity of inflation in Central and Eastern European Countries," Working Papers 2008/13, Nottingham Trent University, Nottingham Business School, Economics Division.
  8. Mishra, Vinod & Sharma, Susan & Smyth, Russell, 2009. "Are fluctuations in energy consumption per capita transitory? Evidence from a panel of Pacific Island countries," Energy Policy, Elsevier, vol. 37(6), pages 2318-2326, June.

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