Stopping Three Big Inflations: Argentina, Brazil, and Peru

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Stopping Three Big Inflations: Argentina, Brazil, and Peru

Kiguel & Liviatan, 1995.

The recent hyperinflations in Argentina, Brazil, and Peru defy much of the widely accepted views regarding the origins and ends of hyperinflations. These “classical” views essentially state that hyperinflations have clear causes, exceptionally large budget deficits financed by money creation, and are brought to a sudden end, through a comprehensive stabilization program. In addition, the stabilization is achieved without much cost in terms of growth and unemployment. Sargent (1982) provides convincing empirical evidence for these propositions based on the European hyperinflations in the midtwenties. The more recent hyperinflation and stabilization in Bolivia by and large conforms with this view.’