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Inflation's Children: Tales of Crises that Beget Reforms

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  • Michael Bruno
  • William Easterly

Abstract

Are broad reforms the children of high inflation? Do growth recoveries follow? We find that countries that had external debt crises with high inflation both reformed more and recovered better than countries that had external debt crises with low inflation. Countries with extremely high inflation also later wound up with lower inflation than countries that has moderately high inflation. The low inflation debtor countries had more aid than the high inflation debtor countries, which may have created stronger incentives to reform in the high inflation countries. Recent reforms look like they are the children of high inflation, even if further paternity tests are in order.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5452.

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Date of creation: Feb 1996
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Publication status: published as American Economic Review, Vol. 86, no. 2 (May 1996): 213-217.
Handle: RePEc:nbr:nberwo:5452

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  1. Mariano Tommasi & Andres Velasco, 1996. "Where are we in the political economy of reform?," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 1(2), pages 187-238.
  2. Jeffrey Sachs & Andrew Warner, 1995. "Economic Reform and the Progress of Global Integration," Harvard Institute of Economic Research Working Papers 1733, Harvard - Institute of Economic Research.
  3. Drazen, Allan & Grilli, Vittorio, 1993. "The Benefit of Crises for Economic Reforms," American Economic Review, American Economic Association, vol. 83(3), pages 598-607, June.
  4. Alesina, Alberto & Drazen, Allan, 1991. "Why Are Stabilizations Delayed?," American Economic Review, American Economic Association, vol. 81(5), pages 1170-88, December.
  5. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
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Cited by:
  1. Sebastian Edwards & Daniel Lederman, 1998. "The Political Economy of Unilateral Trade Liberalization: The Case of Chile," NBER Working Papers 6510, National Bureau of Economic Research, Inc.
  2. Serkan Arslanalp & Peter Blair Henry, 2005. "Is Debt Relief Efficient?," Journal of Finance, American Finance Association, vol. 60(2), pages 1017-1051, 04.
  3. Fidrmuc, Jan & Tichit, Ariane, 2013. "How I learned to stop worrying and love the crisis," Economic Systems, Elsevier, vol. 37(4), pages 542-554.
  4. Alberto Alesina & Silvia Ardagna & Francesco Trebbi, 2006. "Who adjusts and when? On the political economy of reforms," Harvard Institute of Economic Research Working Papers 2108, Harvard - Institute of Economic Research.
  5. VĂ­tor Castro, 2003. "The Impact of Conflicts of Interest on Inflation Stabilization," NIPE Working Papers 8/2003, NIPE - Universidade do Minho.
  6. Peter Blair Henry, 2002. "Is Disinflation Good for the Stock Market?," Journal of Finance, American Finance Association, vol. 57(4), pages 1617-1648, 08.
  7. Rod Falvey & Neil Foster & David Greenaway, . "Trade Liberalisation, Economic Crises and Growth," Discussion Papers 08/14, University of Nottingham, GEP.
  8. Henry, Peter B., 2000. "Is Disinflation Good for Growth?," Research Papers 1657, Stanford University, Graduate School of Business.
  9. Loayza, Norman & Palacios, Luisa, 1997. "Economic reform and progress in Latin America and the Caribbean," Policy Research Working Paper Series 1829, The World Bank.
  10. Allan Drazen, 1997. "Towards a Political-Economic Theory of Domestic Debt," NBER Working Papers 5890, National Bureau of Economic Research, Inc.
  11. Athanasios Vamvakidis, 2007. "External Debt and Economic Reform," IMF Working Papers 07/50, International Monetary Fund.
  12. Pitlik, Hans & Wirth, Steffen, 2003. "Do crises promote the extent of economic liberalization?: an empirical test," European Journal of Political Economy, Elsevier, vol. 19(3), pages 565-581, September.
  13. Serkan Arslanalp & Peter Blair Henry, 2002. "Debt Relief: What Do the Markets Think?," NBER Working Papers 9369, National Bureau of Economic Research, Inc.
  14. Degol Hailu, 2007. "Scaling-up HIV/AIDS Financing and the Role of Macroeconomic Policies in Kenya," Conference Paper 4, International Policy Centre for Inclusive Growth.
  15. Englebert, Pierre, 2000. "Solving the Mystery of the AFRICA Dummy," World Development, Elsevier, vol. 28(10), pages 1821-1835, October.
  16. Abdul Abiad & Ashoka Mody, 2005. "Financial Reform: What Shakes It? What Shapes It?," American Economic Review, American Economic Association, vol. 95(1), pages 66-88, March.

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