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Stopping High Inflation: An Analytical Overview

Author

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  • Carlos A. Végh

    (International Monetary Fund)

Abstract

The evidence on stopping high inflation is interpreted in terms of an analytical framework. The evidence suggests that, by using the exchange rate as the nominal anchor, hyperinflations have been stopped almost overnight with relatively minor output costs. In contrast, exchange rate-based stabilizations in chronic-inflation countries have typically resulted in a sluggish adjustment of the inflation rate, sustained real appreciation of the domestic currency, current account deficits, and an initial expansion in economic activity followed by a contraction. These stylized facts are shown to be consistent with the predictions of a staggered-prices, cash-in-advance model.

Suggested Citation

  • Carlos A. Végh, 1992. "Stopping High Inflation: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 626-695, September.
  • Handle: RePEc:pal:imfstp:v:39:y:1992:i:3:p:626-695
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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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