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Disinflations in Latin America and the Caribbean: A free lunch?

  • Hofstetter, Marc

This paper challenges the conventional view according to which disinflations in Latin America - even from low and moderate peaks - have been carried out at no cost to output. After suggesting a new methodology that overcomes some of the shortcommings of the traditional methods used to measure the costs of disinflations, large sacrifice ratios are obtained for the 1970s and 1980s. While the disinflation costs for the 1990s remain negative, it is shown that an unusual combination of circumstances - i.e., factors related to capital inflows, structural reforms, and the peculiar recent inflation history - can explain this fortunate result.

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File URL: http://www.sciencedirect.com/science/article/B6X4M-4NDDSVS-3/1/18dfdaa0c717a2e3338d4cb0740db77d
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Article provided by Elsevier in its journal Journal of Macroeconomics.

Volume (Year): 30 (2008)
Issue (Month): 1 (March)
Pages: 327-345

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Handle: RePEc:eee:jmacro:v:30:y:2008:i:1:p:327-345
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622617

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  9. Sánchez, Óscar & Seade, Juan & Werner, Alejandro, 2001. "Los costos asociados al proceso desinflacionario," El Trimestre Económico, Fondo de Cultura Económica, vol. 0(270), pages 157-194, abril-jun.
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  14. Laurence Ball, 1998. "Policy Rules for Open Economies," RBA Research Discussion Papers rdp9806, Reserve Bank of Australia.
  15. 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.
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