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Speculative hyperinflations: when can we rule them out?

  • Óscar J. Arce

    ()

    (Banco de España)

Motivated by a strong degree of hysteresis in the stock of monetization observed after the end of hyperinflations, I provide a cash-and-credit model in which the use of money exhibits some persistence because individuals can establish long-lasting credit relationships. This feature helps to account for the main stylized facts of extreme hyperinflations and reconcile some conflicting views on their causes, development and end without departing from rational expectations. Unlike the existing literature, I show that when hysteresis is possible, an orthodox fiscal-monetary reform that successfully stops a speculative hyperinflation may not be sufficient to prevent it.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/06/Fic/dt0607e.pdf
File Function: First version, April 2006
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Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 0607.

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Length: 46 pages
Date of creation: Apr 2006
Date of revision:
Handle: RePEc:bde:wpaper:0607
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  1. Obstfeld, Maurice & Rogoff, Kenneth S., 1983. "Speculative Hyperinflations in Maximizing Models: Can We Rule Them Out?," Scholarly Articles 12491027, Harvard University Department of Economics.
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