Seigniorage and Boliva's Runaway Inflation, 1982-1985

Colin Campbell
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Colin Campbell: Dartmouth College

Eastern Economic Journal, 1995, vol. 21, issue 3, 399-409

Abstract: The runaway inflation in Bolivia from 1982 to 1985 was different from that in most other countries by not being related to war. In this study, seigniorage is viewed as a residual source of government income and the case of Bolivia is analyzed from the public choice point of view. Three conditions explain Bolivia's runaway inflation: a central bank with the power to create money, a government that relies heavily on foreign loans and aid, and a government with a short-run horizon. Under such conditions, governments can be expected to attempt to avoid reductions in their total income, and a sharp cut-back in foreign loans and aid can trigger a runaway inflation.

Keywords: Inflation (search for similar items in EconPapers)
JEL-codes: E31 E65 (search for similar items in EconPapers)
Date: 1995
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