Modern Hyper- and High Inflations / Stanley Fischer, Ratna Sahay, Carlos A. Vegh.

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Fischer, Stanley

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w8930.Publication details: Cambridge, Mass. National Bureau of Economic Research 2002.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Since 1947, hyperinflations (by Cagan's definition) in market economies have been rare. Much more common have been longer inflationary processes with inflation rates above 100 percent per annum. Based on a sample of 133 countries, and using the 100 percent threshold as the basis for a definition of very high inflation episodes, this paper examines the main characteristics of such inflations. Among other things, we find that (i) close to 20 percent of countries have experienced inflation above 100 percent per annum; (ii) higher inflation tends to be more unstable; (iii) in high inflation countries, the relationship between the fiscal balance and seigniorage is strong both in the short and long-run; (iv) inflation inertia decreases as average inflation rises; (v) high inflation is associated with poor macroeconomic performance; and (vi) stabilizations from high inflation that rely on the exchange rate as the nominal anchor are expansionary.

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Previous	nber w8927 A Century of Current Account Dynamics /	nber w8928 Financial Intermediation /	nber w8929 Estimating the Knowledge-Capital Model of the Multinational Enterprise: Comment /	nber w8930 Modern Hyper- and High Inflations /	nber w8931 Religion and Political Economy in an International Panel /	nber w8932 Has Welfare Reform Changed Teenage Behaviors? /	nber w8933 The World Distribution of Income (estimated from Individual Country Distributions) /	Next

May 2002.

Since 1947, hyperinflations (by Cagan's definition) in market economies have been rare. Much more common have been longer inflationary processes with inflation rates above 100 percent per annum. Based on a sample of 133 countries, and using the 100 percent threshold as the basis for a definition of very high inflation episodes, this paper examines the main characteristics of such inflations. Among other things, we find that (i) close to 20 percent of countries have experienced inflation above 100 percent per annum; (ii) higher inflation tends to be more unstable; (iii) in high inflation countries, the relationship between the fiscal balance and seigniorage is strong both in the short and long-run; (iv) inflation inertia decreases as average inflation rises; (v) high inflation is associated with poor macroeconomic performance; and (vi) stabilizations from high inflation that rely on the exchange rate as the nominal anchor are expansionary.