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Disinflations In Latin America And The Caribbean: A Free Lunch?

  • Marc Hofstetter

    ()

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 shortcomings of the traditional methods used to measure the costs of disinflations, large sacrifice ratios are obtained for the 1970s and 80s. While the disinflation costs for the 90s 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://economia.uniandes.edu.co/publicaciones/d2006-04.pdf
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Paper provided by UNIVERSIDAD DE LOS ANDES-CEDE in its series DOCUMENTOS CEDE with number 002375.

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Length: 27
Date of creation: 10 Jan 2006
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Handle: RePEc:col:000089:002375
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  15. Reinhart, Carmen & Rogoff, Kenneth, 2004. "The modern history of exchange rate arrangements: A reinterpretation," MPRA Paper 14070, University Library of Munich, Germany.
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  20. Marc Hofstetter, 2005. "Why Have So Many Disinflations Succeeded?," DOCUMENTOS CEDE 003777, UNIVERSIDAD DE LOS ANDES-CEDE.
  21. Lawrence Huiyan Zhang, 2005. "Sacrifice Ratios with Long-Lived Effects," International Finance, Wiley Blackwell, vol. 8(2), pages 231-262, 08.
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  27. Carlos A. Végh, 1992. "Stopping High Inflation: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 626-695, September.
  28. Leonardo Leiderman & Carmen Reinhart & Guillermo Calvo, 1992. "Capital Inflows and Real Exchange Rate Appreciation in Latin America; The Role of External Factors," IMF Working Papers 92/62, International Monetary Fund.
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