Since 1947, hyperinflations in market economies have been rare. More common have been longer inflationary processes at rates above 100 percent per annum. This paper examines the main characteristics of such very high inflation episodes. We find that (i) almost 20 percent of countries have...

The main purpose of this paper is to provide a simple analytical framework that can guide the development of indicators of fiscal policy sustainability in economies which operate in a highly volatile macroeconomic environment.

Over the last 20 years, some financial events, such as devaluations or defaults, have triggered an immediate adverse chain reaction in other countries--which we call fast and furious contagion. Yet, on other occasions, similar events have failed to trigger any immediate international reaction....

The influential Krugman-Flood-Garber (KFG) model of balance of payment crises assumes that a fixed exchange rate is abandoned if and only if international reserves reach a critical threshold value. From a positive standpoint, the KFG rule is at odds with many episodes in which the central bank...

Both analytical models and casual empiricism suggest that the timing of the recessionary costs associated with inflation stabilization in chronic inflation countries may depend on the nominal anchor that is used. Under money-based stabilization, the recession occurs at the beginning of the...

The dependence of the inflation tax on the level of government spending is analyzed in a public finance context. The key feature of the model is that it recognizes the possibility that conventional taxes, such as the consumption tax, carry increasing marginal collection costs. As a result, the...

Constraints on policy variables that are likely to develop in the context of the European Monetary System by 1992 are incorporated into a public finance framework. The effects of such constraints on the optimal use of the inflation and consumption tax are analyzed. Two questions are addressed:...

The evidence on stopping high inflation is interpreted in terms of an analytical framework. The evidence suggests that, by using the exchange rate as the nominal anchor, hyperinflations have been stopped almost overnight with relatively minor output costs. In contrast, exchange rate-based...

An optimizing model of dual exchange markets that are incompletely separated owing to the presence of fraudulent transactions is analyzed. The model is used to examine the implications of unanticipated and permanent changes in the commercial exchange rate and government spending. It is shown...

Standard real models predict that a permanent increase in oil prices would result in a current account surplus. The surplus occurs because investment falls while saving remains unchanged. This paper shows that if currency substitution is introduced into the analysis, a permanent increase in oil...