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Can the Release of a Monetary Overhang Trigger Hyperinflation?

Author

Listed:
  • Kent Osband
  • Shoukang Lin

Abstract

It is widely feared that, once prices are decontrolled in the formerly centrally–planned economies, households’ release of previously accumulated money will trigger a hyperinflation. This paper finds, instead, that whether a country’s fiscal, monetary, and labor market policies are destabilizing typically does not depend on the money stock. However, the release of a monetary overhang can precipitate a large initial real wage shock. To the extent such a shock is not feasible politically, there is a motive for monetary reform, which must be weighed against the cost of reduced public confidence in money.

Suggested Citation

  • Kent Osband & Shoukang Lin, 1992. "Can the Release of a Monetary Overhang Trigger Hyperinflation?," IMF Working Papers 1992/024, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1992/024
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    Cited by:

    1. Daniela Veronica Gabor, 2012. "The Road to Financialization in Central and Eastern Europe: The Early Policies and Politics of Stabilizing Transition," Review of Political Economy, Taylor & Francis Journals, vol. 24(2), pages 227-249, April.

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