Author : Michael Bruno
Publisher :
ISBN 13 :
Total Pages : 60 pages
Book Rating : 4.3/5 ( download)
Book Synopsis High Inflation and the Nominal Anchors of an Open Economy by : Michael Bruno
Download or read book High Inflation and the Nominal Anchors of an Open Economy written by Michael Bruno and published by . This book was released on 1991 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: A high inflation process is usually due to a real imbalance and cannot be cured without a correction of real furamenta1s. Yet it can be characterized as a quasi-stable nominal process which gets divorced from the real system in what Patinkin could call a valid classical dichotomy. This paper extends the existing seignorage model approach to multiple inflationary equilibria by rationalizing a high inflation equilibrium as well as its stability as the outcomes of sub-optimization by a 'soft' government. It considers the advantages as well as the weaknesses of using the exchange rate as the key nominal anchor in the various stages of stabilization to low (or zero) inflation. Finally the rationale for using multiple nominal anchors is also discussed. Applications of the theoretical arguments are illustrated from recent high inflation and stabilization experience.