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Why Have So Many Disinflations Succeeded?

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  • Marc Hofstetter

Abstract

Why is that the achievements of some disinflations from low and moderate peaks are longlived, whereas in others the gains in the inflationary front dissipate quickly? Based on an index of the sustainability of disinflations proposed in the paper, various competing explanations of what determines sustainability are tested. Three factors, potentially at the top of the list of many researchers, are shown to be insignificant: oil shocks, fiscal policy and inflation targeting. Nevertheless, other important features such as the exchange rate regime, achieving a low inflation rate during the disinflation and food price shocks are shown to be important variables driving the sustainability records.

Suggested Citation

  • Marc Hofstetter, 2005. "Why Have So Many Disinflations Succeeded?," Documentos CEDE 3777, Universidad de los Andes, Facultad de Economía, CEDE.
    • Handle: RePEc:col:000089:003777
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    Cited by:

    1. Marc Hofstetter, 2008. "Why Have So Many Disinflations Succeeded?," Contemporary Economic Policy, Western Economic Association International, vol. 26(1), pages 89-106, January.
    2. Eduardo Wiesner, 2008. "The Political Economy of Macroeconomic Policy Reform in Latin America," Books, Edward Elgar Publishing, number 12913.
    3. Hofstetter, Marc, 2008. "Disinflations in Latin America and the Caribbean: A free lunch?," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 327-345, March.
    4. Miguel Rueda, 2008. "Breaking Credibility in Monetary Policy: The Role of Politics in the Stability of the Central Banker," Research Department Publications 4585, Inter-American Development Bank, Research Department.
    5. Rueda R., Miguel Ricardo, 2008. "Breaking Credibility in Monetary Policy: The Role of Politics in the Stability of the Central Banker," IDB Publications (Working Papers) 1627, Inter-American Development Bank.
    6. Marc Hofstetter, 2007. "Disinflating From Moderate Inflation," Documentos CEDE 2373, Universidad de los Andes, Facultad de Economía, CEDE.
    7. Miguel Rueda, 2008. "Credibilidad en la política monetaria: Papel de políticas en la estabilidad del Presidente del Banco Central," Research Department Publications 4586, Inter-American Development Bank, Research Department.

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    More about this item

    Keywords

    Disinflation; Monetary Policy; Supply Shocks; Inflation Targeting; Exchange;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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