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Real Effects of High Inflation

  • Benedikt Braumann
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    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

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 00/85.

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    Length: 22
    Date of creation: 01 Apr 2000
    Date of revision:
    Handle: RePEc:imf:imfwpa:00/85
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