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High Real Interest Rates in the Aftermath of Disinflation: Is It a Lack of Credibility

Author

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  • Kaminsky, G.L.
  • Leiderman, L.

Abstract

This paper explores the empirical relevance of arguments based on lack of credibility for explaining high ex post real interest rates afetr stabilization programs were implemented in Argentina, Israel, and Mexico in the mid-1980s.

Suggested Citation

  • Kaminsky, G.L. & Leiderman, L., 1996. "High Real Interest Rates in the Aftermath of Disinflation: Is It a Lack of Credibility," Papers 8-96, Tel Aviv.
  • Handle: RePEc:fth:teavfo:8-96
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    References listed on IDEAS

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    1. Rudiger Dornbusch & Juan Carlos de Pablo, 1989. "Debt and Macroeconomic Instability in Argentina," NBER Chapters,in: Developing Country Debt and the World Economy, pages 37-56 National Bureau of Economic Research, Inc.
    2. Hoe E. Khor & Liliana Rojas-Suarez, 1991. "Interest Rates in Mexico: The Role of Exchange Rate Expectations and International Creditworthiness," IMF Staff Papers, Palgrave Macmillan, vol. 38(4), pages 850-871, December.
    3. Karen K. Lewis & Martin D. Evans, 1992. "Do Expected Shifts in Inflation Policy Affect Real Rates?," NBER Working Papers 4134, National Bureau of Economic Research, Inc.
    4. Calvo, Guillermo A, 1992. "Are High Interest Rates Effective for Stopping High Inflation? Some Skeptical Notes," World Bank Economic Review, World Bank Group, vol. 6(1), pages 55-69, January.
    5. Cukierman, Alex & Liviatan, Nissan, 1992. "The Dynamics of Optimal Gradual Stabilizations," World Bank Economic Review, World Bank Group, vol. 6(3), pages 439-458, September.
    6. Sergio Rebelo & Carlos A. Vegh, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," NBER Chapters,in: NBER Macroeconomics Annual 1995, Volume 10, pages 125-188 National Bureau of Economic Research, Inc.
    7. Calvo, Guillermo A. & Kaminsky, Graciela L., 1991. "Debt relief and debt rescheduling : The optimal-contract approach," Journal of Development Economics, Elsevier, vol. 36(1), pages 5-36, July.
    8. Rudiger Dornbusch & Stanley Fischer, 1986. "Stopping hyperinflations past and present," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 122(1), pages 1-47, March.
    9. Ruge-Murcia, Francisco J, 1995. "Credibility and Changes in Policy Regime," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 176-208, February.
    10. Leiderman, Leonardo, 1993. "Inflation and Disinflation," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226471105.
    11. Carlos A. Végh, 1992. "Stopping High Inflation: An Analytical Overview," IMF Staff Papers, Palgrave Macmillan, vol. 39(3), pages 626-695, September.
    12. Hamilton, James D., 1988. "Rational-expectations econometric analysis of changes in regime : An investigation of the term structure of interest rates," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 385-423.
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    Citations

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    Cited by:

    1. Isard, Peter & Laxton, Douglas & Eliasson, Ann-Charlotte, 2001. "Inflation targeting with NAIRU uncertainty and endogenous policy credibility," Journal of Economic Dynamics and Control, Elsevier, vol. 25(1-2), pages 115-148, January.
    2. Frankel, Jeffrey & Saravelos, George, 2012. "Can leading indicators assess country vulnerability? Evidence from the 2008–09 global financial crisis," Journal of International Economics, Elsevier, pages 216-231.
    3. Warwick J McKibbin & Will Martin, 1998. "The East Asian Crisis: Investigating Causes and Policy Responses," Departmental Working Papers 1998-06, The Australian National University, Arndt-Corden Department of Economics.
    4. Bleaney, Michael & Gundermann, Marco, 2007. "Stabilizations, crises and the "exit" problem - A theoretical model," Journal of Macroeconomics, Elsevier, pages 876-890.
    5. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, vol. 89(3), pages 473-500, June.
    6. Prof.Dr. Cevat GERNI & Doc.Dr. O. Selcuk EMSEN & Dr. M. Kemal DEGER, 2005. "Erken Uyari Sistemlerý Yoluyla Turkiye’Deki Ekonomik Krizlerin Analizi," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 2(1), pages 39-62, November.
    7. Alex Luiz Ferreira, 2004. "Leaning Against the Parity," Studies in Economics 0413, School of Economics, University of Kent.
    8. James Yetman, 2001. "Gaining Credibility for Inflation Targets," Staff Working Papers 01-11, Bank of Canada.
    9. Prakash Kannan, 2008. "Perspectives on High Real Interest Rates in Turkey," IMF Working Papers 08/251, International Monetary Fund.
    10. Neven Valev & John A. Carlson, 2002. "Tenuous Financial Stability," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0210, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    11. Nadezhda Ivanova, 2007. "Estimation of the Equilibrium Real Exchange Rate in Russia: Trade-Balance Approach," Working Papers w0102, Center for Economic and Financial Research (CEFIR).

    More about this item

    Keywords

    INTEREST RATE; MONETARY POLICY;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

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