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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
Date of revision:
Handle: RePEc:col:000089:002375
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  1. Taylor, John B, 1983. "Union Wage Settlements during a Disinflation," American Economic Review, American Economic Association, vol. 73(5), pages 981-93, December.
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  13. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
  14. Eduardo Lora & Ugo Panizza, 2002. "Structural Reforms in Latin America under Scrutiny," Research Department Publications 4301, Inter-American Development Bank, Research Department.
  15. Marc Hofstetter, 2008. "Why Have So Many Disinflations Succeeded?," Contemporary Economic Policy, Western Economic Association International, vol. 26(1), pages 89-106, 01.
  16. Eduardo Lora, 2001. "Structural Reforms in Latin America: What Has Been Reformed and How to Measure It," IDB Publications (Working Papers) 39858, Inter-American Development Bank.
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  19. 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.
  20. Guillermo A. Calvo & Carlos A. Végh, 1994. "Inflation Stabilization And Nominal Anchors," Contemporary Economic Policy, Western Economic Association International, vol. 12(2), pages 35-45, 04.
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  22. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky information versus sticky prices: a proposal to replace the New-Keynesian Phillips curve," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  23. Reinhart, Carmen & Vegh, Carlos, 1994. "Inflation stabilization in chronic inflation countries: The empirical evidence," MPRA Paper 13689, University Library of Munich, Germany.
  24. 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.
  25. Temple, Jonathan, 2002. "Openness, Inflation, and the Phillips Curve: A Puzzle," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 450-68, May.
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  27. Laurence Ball, 1993. "What determines the sacrifice ratio?," Working Papers 93-21, Federal Reserve Bank of Philadelphia.
  28. Laurence Ball & N. Gregory Mankiw & David Romer, 1988. "The New Keynsesian Economics and the Output-Inflation Trade-off," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 19(1), pages 1-82.
  29. Lawrence Huiyan Zhang, 2005. "Sacrifice Ratios with Long-Lived Effects," International Finance, Wiley Blackwell, vol. 8(2), pages 231-262, 08.
  30. Kiguel, Miguel A & Liviatan, Nissan, 1992. "The Business Cycle Associated.with Exchange Rate-Based Stabilizations," World Bank Economic Review, World Bank Group, vol. 6(2), pages 279-305, May.
  31. Lawrence Huiyan Zhang, 2001. "Sacrifice Ratios with Long-Lived Effects," Economics Working Paper Archive 446, The Johns Hopkins University,Department of Economics.
  32. Carlos A. Végh, 1992. "Stopping High Inflation: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 626-695, September.
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