 Moderate inflationRüdiger Dornbusch and Stanley Fischer No 807, Policy Research Working Paper Series from The World Bank Abstract: Inflation persists at moderate rates (15-30 percent) in all the countries that successfully reduced triple-digit inflation in the 1980s. Several other countries--for example, Colombia--have experienced moderate inflation for prolonged periods. The authors introduce types of theories of persistent inflation. Theories emphasizing seigniorage as a source of government finance and those emphasizing the costs of ending inflation were detailed. They examine the sources and persistence of episodes of moderate inflation. Most episodes were triggered by commodity price shocks and were brief. Very few ended in higher inflation. This report presents case studies of eight countries, including three that now suffer from moderate inflation and four that successfully moved down to single-digit inflation rates. The authors analyze the roles of seigniorage, indexation and disindexation, the exchange rate commitment, and monetary and fiscal policy. The evidence suggests that seigniorage plays, at most, a modest role in the persistence of moderate inflation and that such inflation can be reduced only at a substantial short-term cost to growth. Keywords: Economic Theory & Research; Economic Conditions and Volatility; Environmental Economics & Policies; Banks & Banking Reform; Inflation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:807 Access Statistics for this paper More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC. |
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