Speculative hyperinflations and currency substitution
We propose a rational expectations framework for understanding speculative hyperinflations that end in response to 'orthodox' stabilization programs. Motivated by a strong degree of hysteresis in the stock of real balances after the end of hyperinflations, we provide a cash-and-credit model in which the money demand exhibits persistence because individuals can establish long-lasting credit relationships. We use the model to show that if hysteresis in real balances is possible then a fiscal-monetary reform that successfully stops a speculative hyperinflation may fail to prevent it. We argue that speculative hyperinflationary equilibria are consistent with some key stylized facts observed in extreme hyperinflations.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Adam, Klaus & Evans, George W. & Honkapohja, Seppo, 2006. "Are hyperinflation paths learnable?," Journal of Economic Dynamics and Control, Elsevier, vol. 30(12), pages 2725-2748, December.
- Obstfeld, Maurice & Rogoff, Kenneth, 1983.
"Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out?,"
Journal of Political Economy,
University of Chicago Press, vol. 91(4), pages 675-87, August.
- Maurice Obstfeld & Kenneth Rogoff, 1982. "Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out?," NBER Working Papers 0855, National Bureau of Economic Research, Inc.
- Maurice Obstfeld & Kenneth S. Rogoff, 1981. "Speculative hyperinflations in a maximizing models: can we rule them out?," International Finance Discussion Papers 195, Board of Governors of the Federal Reserve System (U.S.).
- Obstfeld, Maurice & Rogoff, Kenneth S., 1983. "Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out?," Scholarly Articles 12491027, Harvard University Department of Economics.
- Marcet, A. & Nicolini, J.P., 1997.
"Recurrent Hyperinflations and Learning,"
9721, Centro de Estudios Monetarios Y Financieros-.
- Marcet, Albert & Nicolini, Juan Pablo, 1998. "Recurrent Hyperinflations and Learning," CEPR Discussion Papers 1875, C.E.P.R. Discussion Papers.
- Albert Marcet & Juan P. Nicolini, 1995. "Recurrent hyperinflations and learning," Economics Working Papers 244, Department of Economics and Business, Universitat Pompeu Fabra, revised Nov 2001.
- Kamin, Steven B. & Ericsson, Neil R., 2003. "Dollarization in post-hyperinflationary Argentina," Journal of International Money and Finance, Elsevier, vol. 22(2), pages 185-211, April.
- Stanley Fischer & Ratna Sahay & Carlos A. VÃ©gh Gramont, 2002.
"Modern Hyper- and High Inflations,"
IMF Working Papers
02/197, International Monetary Fund.
- John Duffy & Maxim Nikitin, 2004.
Econometric Society 2004 North American Summer Meetings
456, Econometric Society.
- Catao, Luis A.V. & Terrones, Marco E., 2005.
"Fiscal deficits and inflation,"
Journal of Monetary Economics,
Elsevier, vol. 52(3), pages 529-554, April.
- Eckstein, Z. & Leiderman, L., 1991.
"Seignorage and the Welfare Cost of Inflation; Evidence from an Intertemporal Model of Money and Consumption,"
7-91, Tel Aviv.
- 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.
- Zvi Eckstein & Leonardo Leiderman, 1991. "Seigniorage and the welfare cost of inflation: evidence from an intertemporal model of money and consumption," Discussion Paper / Institute for Empirical Macroeconomics 40, Federal Reserve Bank of Minneapolis.
- Guillermo Calvo & Carlos A. VÃ©gh Gramont, 1992.
"Currency Substitution in Developing Countries; An Introduction,"
IMF Working Papers
92/40, International Monetary Fund.
- Calvo, Guillermo & Vegh, Carlos, 1992. "Currency Substitution in Developing Countries: An Introduction," MPRA Paper 20338, University Library of Munich, Germany.
- Bental, B. & Eckstein, Z., 1988.
"The Dynamics Of Inflation With Constant Deficit Under Expected Regime Change,"
35-88, Tel Aviv.
- Bental, Benjamin & Eckstein, Zvi, 1990. "The Dynamics of Inflation with Constant Deficit under Expected Regime Change," Economic Journal, Royal Economic Society, vol. 100(403), pages 1245-60, December.
- Kiguel, Miguel A & Neumeyer, Pablo Andres, 1995. "Seigniorage and Inflation: The Case of Argentina," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(3), pages 672-82, August.
- Sachs, Jeffrey, 1987. "The Bolivian Hyperinflation and Stabilization," American Economic Review, American Economic Association, vol. 77(2), pages 279-83, May.
- Michael Bruno & Stanley Fischer, 1990. "Seigniorage, Operating Rules, and the High Inflation Trap," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 353-374.
- Nicolini, Juan Pablo, 1996. "Ruling out speculative hyperinflations The role of the government," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 791-809, May.
- Thomas Sargent & Noah Williams & Tao Zha, 2006.
"The Conquest of South American Inflation,"
NBER Working Papers
12606, National Bureau of Economic Research, Inc.
- Mariano Tommasi & Guillermo Mondino & Federico Sturzenegger, 1995.
"Recurrent High Inflation and Stabilization: A Dynamic Game,"
10, Universidad de San Andres, Departamento de Economia, revised Nov 1996.
- 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.
- Peter N. Ireland, 1992.
"Endogenous financial innovation and the demand for money,"
92-03, Federal Reserve Bank of Richmond.
- Ireland, Peter N, 1995. "Endogenous Financial Innovation and the Demand for Money," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(1), pages 107-23, February.
- Uribe, Martin, 1997.
"Hysteresis in a simple model of currency substitution,"
Journal of Monetary Economics,
Elsevier, vol. 40(1), pages 185-202, September.
- Martin Uribe, 1995. "Hysteresis in a simple model of currency substitution," International Finance Discussion Papers 509, Board of Governors of the Federal Reserve System (U.S.).
- Beatrix Paal, 2000. "Destabilizing effects of a successful stabilization: a forward-looking explanation of the second Hungarian hyperinflation," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 15(3), pages 599-630.
- Petrovic, Pavle & Bogetic, Zeljko & Vujosevic, Zorica, 1999. "The Yugoslav Hyperinflation of 1992-1994: Causes, Dynamics, and Money Supply Process," Journal of Comparative Economics, Elsevier, vol. 27(2), pages 335-353, June.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:33:y:2009:i:10:p:1808-1823. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.