Hyperinflationinflation tax and economic policy regime

Resumo

This paper shows that price level indeterminacy in monetary models with multiple equilibria can be solved by the selection of an appropriate monetary policy regime, according to the demand elasticity of the real quantity of money with respect to inflation rate. Money is essential when this elasticity is less than one, in absolute value. In the monetary regime, in which the central bank controls money growth, hyperinflation does not occur when money is essential, but may occur when it is not. In the fiscal regime, typical of the 20th century's hyperinflation experiences, wherein the issuance of money is used to finance the public deficit, the hyperinflation of stationary equilibrium occurs when money is essential and the public deficit reaches a critical value. However, if money is not essential such equilibrium does not exist. The essentiality of money is therefore an important aspect to consider and should not be decided on the basis of merely theoretical arguments. The hypothesis that the social cost of hyperinflation is infinite cannot be rejected a priori, but it has to be tested by using inflation tax data from hyperinflation experiences.

Ficha do documento

Tipo

Artigo científico

Ano

2002

Instituição

Sociedade Brasileira de Econometria

Fonte

Repositório da FGV

Idioma

Inglês

Acesso

Acesso aberto

DOI

10.12660/bre.v22n22002.2736

Identificador

oai:repositorio.fgv.br:10438/27121

Temas

EconomiaFinanças Públicas

Palavras-chave

HyperinflationInflation taxEconomiaPolítica econômicaInflação