Stopping Hyperinflations Past and Present
We examine four successful stabilizations from high inflation -- Germany in 1923,Austria in 1922, in Poland 1924-27, Italy 1947 --and the two ongoing attempted stabilization in Israel and Argentina, with the aim of identifying general lessons from those episodes. The key issues in a stabilization are the budget, the exchange rate, and money. Budget deficits were significantly reduced in each case , but were not in all cases completely removed. The exchange rate was pegged in each case , through in all but the Italian case, each stabilization was also preceded by at least one episode in which attempted stabilization through exchange rate pegging was unsuccessful. As pointed out by Sargent and others , money growth rates were high after each stabilization, suggesting that any stabilization that strictly controls the growth of money will produce serious recession. A common feature of stabilizations is a period of extremely high real interest rates.
|Date of creation:||Jan 1986|
|Date of revision:|
|Publication status:||published as Dornbusch, Rudiger and Stanley Fischer. "Stopping Hyperinflations Past and Present," Review of World Economics (Weltwirtschaftliches Archiv), Vol. 122, no. 1, (March 1986), pp. 1-47.|
|Note:||EFG ITI IFM|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
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- Flood, Robert P. & Garber, Peter M., 1984. "Collapsing exchange-rate regimes : Some linear examples," Journal of International Economics, Elsevier, vol. 17(1-2), pages 1-13, August.
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- Thomas J. Sargent, 1982.
"The Ends of Four Big Inflations,"
in: Inflation: Causes and Effects, pages 41-98
National Bureau of Economic Research, Inc.
- Rudiger Dornbusch, 1984. "Argentina Since Martinez De Hoz," NBER Working Papers 1466, National Bureau of Economic Research, Inc.
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