Can the Release of a Monetary Overhang Trigger Hyperinflation?
Summary:
It is widely feared that, once prices are decontrolled in the formerly centrally–planned economies, households’ release of previously accumulated money will trigger a hyperinflation. This paper finds, instead, that whether a country’s fiscal, monetary, and labor market policies are destabilizing typically does not depend on the money stock. However, the release of a monetary overhang can precipitate a large initial real wage shock. To the extent such a shock is not feasible politically, there is a motive for monetary reform, which must be weighed against the cost of reduced public confidence in money.
Series:
Working Paper No. 1992/024
Subject:
Bonds Financial institutions Inflation Labor Prices Real wages Wage adjustments Wages
English
Publication Date:
March 1, 1992
ISBN/ISSN:
9781451920956/1018-5941
Stock No:
WPIEA0241992
Pages:
36
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