Hyperinflation in a small open economy with a fixed exchange rate: A post Keynesian view

Sebastien Charles and Jonathan Marie

Journal of Post Keynesian Economics, 2016, vol. 39, issue 3, 361-386

Abstract: This paper examines the emergence of hyperinflation in a small open economy with a fixed exchange rate from a post Keynesian perspective. Three variables play key roles: distributive conflict, external debt, and expectations about the exchange rate. First, we propose a short-run Kaleckian macro model. Then, we study the long-run behavior of the model by endogenizing the price level and foreign indebtedness. We conclude that the existence of expectations about the nominal exchange rate is crucial to explaining the emergence of hyperinflation.

Date: 2016
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DOI: 10.1080/01603477.2016.1200950

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