Recurrent High Inflation and Stabilization: A Dynamic Game
AbstractWe analyze the dynamics of inflation that arise from fiscal deficits caused by the noncooperative behavior of interest groups. The "state" variable is the degree of financial adaptation, a proxy for the share of wealth agents hold in alternatives to domestic currency. As financial adaptation becomes widespread, the costs of financing a given budget deficit rise. In this context, there can be fully rational cycles of increasing inflation and financial adaptation, followed by stabilization and remonetization. The model seems applicable to the experi- ence of many Latin American countries
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Bibliographic InfoPaper provided by Universidad de San Andres, Departamento de Economia in its series Working Papers with number 10.
Length: 16 pages
Date of creation: Oct 1995
Date of revision: Nov 1996
Publication status: Published in International Economic Review, November 1996, 37(4): 981-996
Other versions of this item:
- Mondino, Guillermo & Sturzenegger, Federico & Tommasi, Mariano, 1996. "Recurrent High Inflation and Stabilization: A Dynamic Game," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(4), pages 981-96, November.
- Guillermo Mondino & Federico Sturzenegger & Mariano Tommasi, 1992. "Recurrent High Inflation and Stabilization, A Dynamic Game," UCLA Economics Working Papers 678, UCLA Department of Economics.
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