Working Paper: NBER ID: w8930
Authors: Stanley Fischer; Ratna Sahay; Carlos A. Vgh
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.
Keywords: No keywords provided
JEL Codes: F41; E63
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| higher inflation (E31) | poor macroeconomic performance (E69) |
| higher inflation (E31) | inflation volatility (E31) |
| fiscal balance (E62) | inflation (E31) |
| seigniorage (E42) | inflation (E31) |
| average inflation (E31) | inflation inertia (E31) |
| high inflation (E31) | stabilization efforts (exchange rate as nominal anchor) (F31) |
| stabilization efforts (exchange rate as nominal anchor) (F31) | economic activity (E20) |