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Stopping High Inflation: An Analytical Overview

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  • Vegh, Carlos

Abstract

This paper reviews the evidence on stabilization plans in high inflation countries within a unified theoretical framework. The evidence suggests that hyperinflations have been stopped almost instantaneously with no major output costs, while stabilization programs in chronic inflation countries have resulted in an initial expansion followed by a later recession, in addition to a sustained real exchange rate appreciation and current account deficits. These outcomes turn out to be consistent with the predictions of the analytical model.

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File URL: http://mpra.ub.uni-muenchen.de/20175/
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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 20175.

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Date of creation: Nov 1991
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Handle: RePEc:pra:mprapa:20175

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Keywords: inflation; stabilization;

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  1. Allan Drazen & Elhanan Helpman, 1986. "Inflationary Consequences of Anticipated Macroeconomic Policies," NBER Working Papers 2006, National Bureau of Economic Research, Inc.
  2. Garber, Peter M., 1982. "Transition from inflation to price stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 16(1), pages 11-42, January.
  3. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  4. Avinash K. Dixit, 1990. "The Optimal Mix of Inflationary Finance and Commodity Taxation with Collection Lags," IMF Working Papers 90/87, International Monetary Fund.
  5. Juan Antonio Morales & Jeffrey Sachs, 1988. "Bolivia's Economic Crisis," NBER Working Papers 2620, National Bureau of Economic Research, Inc.
  6. Rudiger Dornbusch & Stanley Fischer, 1986. "Stopping Hyperinflations Past and Present," NBER Working Papers 1810, National Bureau of Economic Research, Inc.
  7. Helpman, Elhanan & Razin, Assaf, 1987. "Exchange Rate Management: Intertemporal Tradeoffs," American Economic Review, American Economic Association, vol. 77(1), pages 107-23, March.
  8. Guillermo Calvo & Carlos A. Végh Gramont, 1990. "Money Supply and Interest Rate Policy in a New-Keynesian Framework," IMF Working Papers 90/119, International Monetary Fund.
  9. Kiguel, Miguel A & Liviatan, Nissan, 1988. "Inflationary Rigidities and Orthodox Stabilization Policies: Lessons from Latin America," World Bank Economic Review, World Bank Group, vol. 2(3), pages 273-98, September.
  10. Drazen, Allan & Helpman, Elhanan, 1987. "Stabilization with Exchange Rate Management," The Quarterly Journal of Economics, MIT Press, vol. 102(4), pages 835-55, November.
  11. Obstfeld, Maurice, 1985. "The Capital Inflows Problem Revisited: A Stylized Model of Southern Cone Disinflation," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 605-25, October.
  12. Corbo, Vittorio & de Melo, Jaime & Tybout, James, 1986. "What Went Wrong with the Recent Reforms in the Southern Cone," Economic Development and Cultural Change, University of Chicago Press, vol. 34(3), pages 607-40, April.
  13. Fischer, Stanley, 1988. "Real Balances, the Exchange Rate, and Indexation: Real Variables in Disinflation," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 27-49, February.
  14. Rodriguez, Carlos Alfredo, 1982. "The Argentine stabilization plan of December 20th," World Development, Elsevier, vol. 10(9), pages 801-811, September.
  15. Julio H. G. Olivera, 1967. "Money, prices and fiscal lags: a note on the dynamics of inflation," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 20(82), pages 258-267.
  16. Sachs, Jeffrey, 1987. "The Bolivian Hyperinflation and Stabilization," American Economic Review, American Economic Association, vol. 77(2), pages 279-83, May.
  17. Wicker, Elmus R, 1986. "Terminating Hyperinflation in the Dismembered Habsburg Monarchy," American Economic Review, American Economic Association, vol. 76(3), pages 350-64, June.
  18. Thomas J. Sargent, 1981. "The ends of four big inflations," Working Papers 158, Federal Reserve Bank of Minneapolis.
  19. Helpman, Elhanan & Leiderman, Leonardo, 1988. "Stabilization in high inflation countries: Analytical foundations and recent experience," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 28(1), pages 9-84, January.
  20. Dornbusch, Rudiger, 1982. "Stabilization policies in developing countries: What have we learned?," World Development, Elsevier, vol. 10(9), pages 701-708, September.
  21. Edwards, Sebastian & Edwards, Alejandra Cox, 1991. "Monetarism and Liberalization," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226184890, June.
  22. Guillermo A. Calvo & Carlos A. Végh, 1990. "Interest Rate Policy in a Small Open Economy: The Predetermined Exchange Rates Case," IMF Staff Papers, Palgrave Macmillan, vol. 37(4), pages 753-776, December.
  23. Fischer, Stanley, 1983. "Indexing and inflation," Journal of Monetary Economics, Elsevier, vol. 12(4), pages 519-541, November.
  24. Vito Tanzi, 1977. "Inflation, Lags in Collection, and the Real Value of Tax Revenue (L'inflation, les retards de recouvrement et la valeur réelle des recettes fiscales) (Inflación, desfases en la recaudación y ," IMF Staff Papers, Palgrave Macmillan, vol. 24(1), pages 154-167, March.
  25. Solimano, Andres, 1989. "Inflation and the costs of stabilization : country experiences, conceptual issues, and policy lessons," Policy Research Working Paper Series 226, The World Bank.
  26. Foxley, Alejandro, 1980. "Stabilization policies and stagflation: The cases of Brazil and Chile," World Development, Elsevier, vol. 8(11), pages 887-912, November.
  27. Bijan B. Aghevli & Mohsin S. Khan, 1978. "Government Deficits and the Inflationary Process in Developing Countries (Déficits publics et processus inflationniste dans les pays en développement) (Los déficit públicos y el proceso in," IMF Staff Papers, Palgrave Macmillan, vol. 25(3), pages 383-416, September.
  28. Michael Bruno & Guido Di Tella & Rudiger Dornbusch & Stanley Fischer, 1988. "Inflation Stabilization: The Experience of Israel, Argentina, Brazil, Bolivia, and Mexico," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022796, December.
  29. Stanley Fischer, 1984. "Real Balances, the Exchange Rate and Indexation: Real Variables in Disinflation," NBER Working Papers 1497, National Bureau of Economic Research, Inc.
  30. Julio H. G. Olivera, 1967. "Money, prices and fiscal lags: a note on the dynamics of inflation," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 20(82), pages 258-267.
  31. Kiguel, Miguel & Liviatan, Nissan, 1990. "The business cycle associated with exchange-rate-based stabilization," Policy Research Working Paper Series 513, The World Bank.
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