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Real Effects of High Inflation

Author

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  • Benedikt Braumann

Abstract

This paper revisits the question of the real effects of inflation, on the basis of the experience with 23 high inflation episodes in 17 countries. It finds strong indications that inflation had contractionary effects on a number of important macroeconomic variables, such as GDP, investment and employment. Moreover, high inflation led to a significant decline in real wages, a real depreciation and an improvement in external trade. These patterns are consistent with explanations that stress the transaction role of money, such as models with a cash-in-advance constraint. However, some observations are hard to reconcile with existing theory, especially the large magnitude of the fall in real wages.1

Suggested Citation

  • Benedikt Braumann, 2000. "Real Effects of High Inflation," IMF Working Papers 00/85, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:00/85
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    Cited by:

    1. F. Heylen & L. Pozzi & J. Vandewege, 2004. "Inflation crises, human capital formation and growth," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/260, Ghent University, Faculty of Economics and Business Administration.
    2. Benedikt Braumann, 2001. "High Inflation and Real Wages," IMF Working Papers 01/50, International Monetary Fund.
    3. Jens R Clausen & Sharmini Coorey & Bakar Ould-Abdallah & Sònia Muñoz & Norbert Funke, 2007. "Lessons From High Inflation Epidsodes for Stabilizing the Economy in Zimbabwe," IMF Working Papers 07/99, International Monetary Fund.
    4. Shaw, Ming-Fu & Lai, Ching-Chong & Chang, Wen-Ya, 2005. "Anticipated policy and endogenous growth in a small open monetary economy," Journal of International Money and Finance, Elsevier, vol. 24(5), pages 719-743, September.
    5. Wojciech Charemza & Svetlana Makarova & Imran Shah, 2013. "Frequent episoded of high inflation and real effects," EcoMod2013 5478, EcoMod.
    6. Diego Nicolás Moccero, 2001. "Esquemas Cambiarios y Monetarios Alternativos en un Modelo de Interdependencia Macroeconómica entre Argentina y Brasil," Department of Economics, Working Papers 031, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata.

    More about this item

    Keywords

    Inflation; Wages; real effects; superneutrality; cash-in-advance constraint; real wages; high inflation; monetary economics; inflation crises;

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