IDEAS home Printed from https://ideas.repec.org/p/unu/wpaper/dp2003-44.html
   My bibliography  Save this paper

Inflation, Output and Perfectly Enforceable Price Controls in Orthodox and Heterodox Stabilization Programmes

Author

Listed:
  • Mario Reyna-Cerecero
  • George Mavrotas

Abstract

The paper deals with the success of price controls in stabilizing high inflation rates and their effects on the real economy under an imperfect competition setting derived by optimal maximization. Our model builds on Helpman's work of price controls and imperfect competition, and incorporates inflation inertia through adaptive expectations. The model predicts that under these circumstances price controls can be an effective method of curving inflation when they accompany an orthodox monetary restriction programme; incomes policies alone cannot curve inflation substantially.

Suggested Citation

  • Mario Reyna-Cerecero & George Mavrotas, 2003. "Inflation, Output and Perfectly Enforceable Price Controls in Orthodox and Heterodox Stabilization Programmes," WIDER Working Paper Series DP2003-44, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:dp2003-44
    as

    Download full text from publisher

    File URL: https://www.wider.unu.edu/sites/default/files/dp2003-044.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Agenor, Pierre-Richard, 1995. "Credibility effects of price controls in disinflation programs," Journal of Macroeconomics, Elsevier, vol. 17(1), pages 161-171.
    2. Helpman, Elhanan, 1988. "Macroeconomic Effects of Price Controls: The Role of Market Structure," Economic Journal, Royal Economic Society, vol. 98(391), pages 340-354, June.
    3. Jorge E. Roldós, 1995. "Supply-Side Effects of Disinflation Programs," IMF Staff Papers, Palgrave Macmillan, vol. 42(1), pages 158-183, March.
    4. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    5. Dertouzos, James N & Pencavel, John H, 1981. "Wage and Employment Determination under Trade Unionism: The International Typographical Union," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1162-1181, December.
    6. Sergio Rebelo & Carlos A. Végh, 1995. "Real Effects of Exchange-Rate-Based Stabilization: An Analysis of Competing Theories," NBER Chapters, in: NBER Macroeconomics Annual 1995, Volume 10, pages 125-188, National Bureau of Economic Research, Inc.
    7. Michael Bruno & Stanley Fischer, 1990. "Seigniorage, Operating Rules, and the High Inflation Trap," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 353-374.
    8. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-595, September.
    9. Rudiger Dornbusch & Ferico Sturzenegger & Holger Wolf, 1990. "Extreme Inflation: Dynamics and Stabilization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 1-84.
    10. Jensen, Henrik, 1993. "Uncertainty in interdependent economies with monopoly unions," Journal of Macroeconomics, Elsevier, vol. 15(1), pages 1-24.
    11. van Wijnbergen, Sweder, 1988. "Monopolistic competition, credibility and the output costs of disinflation programs An analysis of price controls," Journal of Development Economics, Elsevier, vol. 29(3), pages 375-398, November.
    12. Buira, Ariel, 1983. "IMF financial programs and conditionality," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 111-136.
    13. Naish, Howard F, 1988. "Optimal Union Wage Setting Behaviour and the Non-neutrality of Anticipated Monetary Changes," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 346-364, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Agenor, Pierre-Richard & Asilis, Carlos M., 1997. "Price controls and electoral cycles," European Journal of Political Economy, Elsevier, vol. 13(1), pages 131-142, February.
    2. Stanley Fischer & Ratna Sahay & Carlos A. Végh, 2002. "Modern Hyper- and High Inflations," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 837-880, September.
    3. Calvo, Guillermo A. & Vegh, Carlos A., 1999. "Inflation stabilization and bop crises in developing countries," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 24, pages 1531-1614, Elsevier.
    4. Kamin, Steven B., 2001. "Real exchange rates and inflation in exchange-rate-based stabilizations: an empirical examination," Journal of Development Economics, Elsevier, vol. 64(1), pages 237-253, February.
    5. Anne O. Krueger, 2019. "Increased capital mobility and policy reform in developing countries," Indian Economic Review, Springer, vol. 54(1), pages 113-133, December.
    6. Bennett, John & Dixon, Huw David, 1995. "Macroeconomic equilibrium and reform in a transitional economy," European Economic Review, Elsevier, vol. 39(8), pages 1465-1485, October.
    7. Almas Heshmati & Ilham Haouas, 2004. "The effects of union wage-settings on firms' production factor decisions," Applied Economics Letters, Taylor & Francis Journals, vol. 11(7), pages 415-420.
    8. Sujit Kapadia, 2003. "The Capital Stock and Equilibrium Unemployment: A New Theoretical Perspective," Economics Series Working Papers 181, University of Oxford, Department of Economics.
    9. Venegas-Martinez, Francisco, 2006. "Stochastic temporary stabilization: Undiversifiable devaluation and income risks," Economic Modelling, Elsevier, vol. 23(1), pages 157-173, January.
    10. Matovnikov Mikhail, 2003. "The ups and downs of banking system in transition," EERC Working Paper Series 99-244e, EERC Research Network, Russia and CIS.
    11. Hoffmaister, Alexander W. & Roldos, Jorge E., 2001. "The Sources of Macroeconomic Fluctuations in Developing Countries: Brazil and Korea," Journal of Macroeconomics, Elsevier, vol. 23(2), pages 213-239, April.
    12. Lahiri, Amartya, 2001. "Exchange rate based stabilizations under real frictions: The role of endogenous labor supply," Journal of Economic Dynamics and Control, Elsevier, vol. 25(8), pages 1157-1177, August.
    13. Federico Echenique & Alvaro Forteza, 2000. "Are stabilization programs expansionary?," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 15(1), pages 65-89.
    14. Jacques H. Drèze & P. Jean‐Jacques Herings, 2008. "Kinky perceived demand curves and Keynes–Negishi equilibria," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(2), pages 207-246, June.
    15. Stavros Drakopoulos & Ioannis Katselidis, 2014. "The Development of Trade Union Theory and Mainstream Economic Methodology," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(4), pages 1133-1149, December.
    16. Nicholas Lawson, 2011. "Is Collective Bargaining Pareto Efficient? A Survey of the Literature," Journal of Labor Research, Springer, vol. 32(3), pages 282-304, September.
    17. Bruno, Michael & Easterly, William, 1998. "Inflation crises and long-run growth," Journal of Monetary Economics, Elsevier, vol. 41(1), pages 3-26, February.
    18. Giovanni Di Bartolomeo, 2014. "Optimal Degree of Union Centralization," Studies in Microeconomics, , vol. 2(2), pages 201-211, December.
    19. Mulder, C B, 1993. "Wage-Moderating Effects of Corporatism: Decentralized versus Centralized Wage Setting in a Union, Firm, Government Context," The Manchester School of Economic & Social Studies, University of Manchester, vol. 61(3), pages 287-301, September.
    20. John Pencavel, 2009. "How Successful Have Trade Unions Been? A Utility-Based Indicator of Union Well-Being," ILR Review, Cornell University, ILR School, vol. 62(2), pages 147-156, January.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:unu:wpaper:dp2003-44. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Siméon Rapin (email available below). General contact details of provider: https://edirc.repec.org/data/widerfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.