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Inflation and Monetary Reform

Author

Listed:
  • Pierre-Richard Agénor
  • Ms. Anna Lennblad

Abstract

The introduction of a new currency has often occurred as part of a program to fight hyperinflation. In this context, non-uniform conversion rates for different types of assets and liabilities have been used as a means of reducing an initial “excess” stock of liquidity. The paper examines the anticipatory dynamics associated with such reforms. The analysis suggests that monetary reforms of this type have a deflationary effect upon announcement as well as during the transition period. Under uncertainty about the reform date, the direction of the initial jump in prices upon announcement is a priori ambiguous. Upon implementation, a monetary reform leads to a downward jump in prices.

Suggested Citation

  • Pierre-Richard Agénor & Ms. Anna Lennblad, 1992. "Inflation and Monetary Reform," IMF Working Papers 1992/060, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1992/060
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