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Hyperinflation and stabilisation: Cagan revisited
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UNSPECIFIED (1997) Hyperinflation and stabilisation: Cagan revisited. ECONOMIC JOURNAL, 107 (441). pp. 441-454. ISSN 0013-0133.
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Abstract
Using a variant of the Cagan model with rational expectations, this paper shows that expected stabilisation can result in a budget deficit in excess of the maximum inflation tax. A cap on the deficit dampens inflation expectations and raises real balances thus increasing the yield of the inflation tax for any given rate of inflation. This study extends the work of Drazen and Helpman (1990) by including a stochastic budgetary process and using option pricing theory. It uses parameter values of the semi-elasticity of demand for money to provide estimates of the maximum viable real deficit.
Item Type: | Journal Article | ||||
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Subjects: | H Social Sciences > HC Economic History and Conditions | ||||
Journal or Publication Title: | ECONOMIC JOURNAL | ||||
Publisher: | BLACKWELL PUBL LTD | ||||
ISSN: | 0013-0133 | ||||
Official Date: | March 1997 | ||||
Dates: |
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Volume: | 107 | ||||
Number: | 441 | ||||
Number of Pages: | 14 | ||||
Page Range: | pp. 441-454 | ||||
Publication Status: | Published |
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