A Fiscal Theory of Hyperdeflations? Some Surprising Monetarist Arithmetic
The note mines an unsuspected lode in the Sargent-Wallace "Unpleasant Monetarist Arithmetic" deposit. While that model is shown to be incapable of generating hyperinflations as a result of large monetized public sector deficits, it can generate hyperdeflations or perhaps more accurately, the first stages of an unsustainable process of hyperdeflation. The drawing of policy conclusions is left as an exercise for the reader.
|Date of creation:||Nov 1985|
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|Publication status:||published as Buiter, Willem H. "A Fiscal Theory of Hyperdeflations? Some Surprising Monetarist Arithmetic," Oxford Economic Papers, Vol. 3G, No. 3. (1987)|
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