Money Creation and Excess Liquidity in Cuba : A Monetary Circuit Analysis

The 1989 crisis in Cuba translated into the accumulation of real internal disequilibria, with large impacts in both the fiscal and the monetary environments. As in most transition economies, monetary manifestations included a repressed inflation in the regulated market; price increase in the informal economy; and an excess accumulation of money in the hands of households. Monetary dynamics in Cuba are difficult to explain using traditional economic instruments. The paper presents an interpretation of these disequilibria from a monetary circuit point of view, showing that the excess liquidity in the hands of the population results from a real shock and has its counterpart in the fiscal or quasi-fiscal deficit and the accumulation of unpaid bills among firms