Disinflation and The Recession-Now-versus-Recession-Later Hypothesis: Evidence from Uruguay

Alexander Hoffmaister and Carlos A. Végh
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Carlos A. Végh: International Monetary Fund

IMF Staff Papers, 1996, vol. 43, issue 2, 355-394

Abstract: Both analytical models and casual empiricism suggest that the timing of the recessionary costs associated with inflation stabilization in chronic inflation countries may depend on the nominal anchor that is used. Under money-based stabilization, the recession occurs at the beginning of the program, while under exchange-rate-based stabilization the recession occurs later in the program. This paper provides a first attempt to formally test this hypothesis using a vector-autoregression model for Uruguay. The impulse response of output to different stabilization policies is broadly consistent with the "recession-now-versus-recession-later" hypothesis.

JEL-codes: C3 E3 E5 (search for similar items in EconPapers)
Date: 1996
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Citations: View citations in EconPapers (33)

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Working Paper: Disinflation and the Recession-Now-Versus-Recession-Later Hypothesis: Evidence From Uruguay (1995)
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