Chronic Inflation Research Articles

Living with Inflation in Argentina

Argentina has been burdened for many decades with high inflation, reaching three or even four digits in hyperinflationary periods. The recurring price spirals in Argentine history, particularly since the beginning of the current century, have affected the middle class’s perception of the present and the future, constructing what can be called an inflationary experience. Governments from across the political spectrum have failed to solve the problem, leading to the election of a radical outsider candidate as president in 2023. This article examines the ways in which the middle class in Buenos Aires copes with inflation, and how the experience of chronic inflation and crisis produces ways of coping that at the same time may generate more inflation.

How inflation affects Japan’s “quantitatively eased” economy

This article argues that the Bank of Japan is caught in a bind owing to both its quantitative easing policies of the last two decades and chronic inflation. In response to quantitative tightening abroad, the Bank of Japan is under pressure to raise interest rates and/or allow yields on ten-year government bonds to rise. This is because the response to inflation among G7 nations has undermined the yen, which have made clear the flaws of the Bank of Japan’s approach to restoring economic growth, namely quantitative easing as any attempt to adapt to international efforts to address inflation, using monetary methods, runs the risk of triggering a cascade of loan defaults due to illiquidity issues both at home and in foreign markets. To demonstrate this, the article evaluates Japanese quantitative easing measures, including the Bank of Japan’s yield curve control policy, and assesses the problems it faces due to inflation and the responses to it, including monetary tightening abroad.

AN ANTHROPOLOGICAL PERSPECTIVE REGARDING PSYCHOTHERAPY FROM THE NOOGENIC NEUROSES TOWARDS A MORE GENERALISED SOCIOGENIC PSYCHOSIS

We are living in hard and complicated times – unfortunately nobody knows any more what is good and what is bad. Big problems are already looming upon us: AI, global warming, population ageing and chronic inflation, distrust in government, pandemic and so on. In such problematic times, psychologists and psychotherapists, psychiatrists as well – the new “soul-gurus” of our age – should be the first to interrogate themselves about how we can encounter the plethora of issues the new millennium has on offer. As such, what this paper is trying to show, is that psychology can be in the first line of a more general anthropological perspective to understand our existential struggle. Instead of always looking to others, i.e. our clients, we should firstly analyse our own life, our options and beliefs system, our existential philosophy, and the general direction of our actions. After that, and only after that exceptional and unusual turn-around, should we see if there is any place or time or enthusiasm left for therapy and psychological care for others. In other words, we should not forget the old saying: “medice, cura te ipsum!”, and start with that centripetal ego-centeredness and not the other way around. Focusing on one’s own issues, family problems, social or professional developments is to see if everything is in its right place. Only after that should we go out to the world and cure, or help to cure the problems of our fellow citizens. By doing that unconventional psychological and unusual anthropological reconveying under the strict observance of “self-Supervision” and “multiple-self InterVision”, psychologists and therapists will have at least a solid nuclear self and, additionally, an incontrovertible starting point in life. A starting point not diluted, or neglected, or permanently postponed by the luring others (clients for instance), with their endless difficulties, complicated issues or inexhaustible problems, constantly and relentlessly exerted on us?

Meniere’s attack – a volume or pressure phenomenon?

Meniere’s disease (MD) still raises since its discovery in 1860 pathophysiological and etiopathogenical issues. The main pathophysiological feature that has emerged for decades is an anatomic one, the endolymphatic hydrops (EH), defined by the inflation of the endolymphatic part of the membranous labyrinth. However, the causal relationship between EH and MD has not been proven. Several attempts have been achieved in animals to induce EH. The best known is the blockage of the vestibular duct, which causes a chronic volume inflation of the endolymphatic part. This model is characterized by the discrepancy between electrophysiological findings and scala media inflation. Pressure measurements vary among studies. The endolymphatic infusion model, which attempts to model the acute clinical picture of MD consistently shows pressure equilibration between the endolymphatic and perilymphatic compartments, and rapid recovery of the electrophysiological finding once the injection is stopped.

Economic development and stagnation in Brazil (1950–2011)

Labor productivity growth in Brazil, after showing positive annual rates between 1950 and 1979, became stagnant after 1980. We decompose, calculate and analyze statistical evidence on the Brazilian labor productivity growth in the period 1950–2011, according to “structural change” and “within” components as proposed by McMillan and Rodrik's (2011) methodology. Since it is almost a consensus that the stagnation in the subperiod 1980–1994 is explained by the external debt crisis and chronic inflation rates, we regressed labor productivity growth as well as its two components on several microeconomic and macroeconomic variables in Brazil for the period 1995–2011. The results show that the stagnation of the Brazilian economy in the recent decades is explained by the overvaluation of the Brazilian currency, the reprimarization of the export basket, the low degree of Brazil's trade openness and the high real interest rates prevailing in the period.

Inflation Targets in Latin America

Many emerging-market economies have adopted inflation targeting regimes since they were introduced by New Zealand in 1990. Latin America has not been the exception. Currently eight Latin American countries conduct monetary policy through inflation targeting regimes: Brazil, Chile, Colombia, Guatemala, Mexico, Paraguay, Peru, and Uruguay. This paper reviews the history of chronic inflation in Latin America and describes these countries’ experience with inflation targets and their performance during the global financial crisis.

Monetary and Fiscal History of Peru 1960-2010: Radical Policy Experiments, Inflation, and Stabilization

We describe Peru’s experience of chronic inflation through the 1970s and 1980s as a result of the need for inflationary taxation in a regime of fiscal dominance of monetary policy. Hyperinflation occurred when further debt accumulation became unavailable, and a populist administration engaged in a counterproductive policy of price controls and loose credit. We interpret the fiscal difficulties preceding the stabilization as a process of social learning to live within the realities of fiscal budget balance. The credibility of policy regime change in the 1990s may be linked ultimately to the change in public opinion giving proper incentives to politicians, after the traumatic consequences of the hyper stagflation of 1987-1990.

The Brazilian Connection in Milton Friedman’s 1967 Presidential Address and 1976 Nobel Lecture

This article investigates the role played by Friedman’s interpretation of Brazilian inflation in his 1967 formulation of the natural rate hypothesis and in his 1976 discussion of indexation and other institutional arrangements in the face of chronic inflation. It is argued that, as an empirical economist and in the absence of evidence from industrialized countries, Friedman found in the Brazilian 1964–66 stabilization episode significant support for his argument about inflation acceleration and a shifting Phillips curve. Friedman’s interest in the Brazilian inflationary and growing economy prompted him to visit the country in 1973. The context and implications of Friedman’s Brazilian travel are also tackled in the paper.

Monetary and Fiscal History of Peru 1960-2010: Radical Policy Experiments, Inflation and Stabilization

We show that Peru’s chronic inflation through the 1970s and 1980s was the result of the need for inflationary taxation in a regime of fiscal dominance of monetary policy. Hyperinflation occurred when debt accumulation became unavailable, and a populist administration engaged in a counterproductive policy of price controls and loose credit. We interpret the fiscal difficulties preceding the stabilization as a process of social learning to live within the realities of fiscal budget balance. The credibility of the policy regime change in the 1990s may be linked ultimately to the change in public opinion giving proper incentives to politicians, after the traumatic consequences of the hyperstagflation of 1987-1990. JEL Classification-JEL: E52 , E58 , E62

The Brazilian Connection in Milton Friedman's 1967 Presidential Address and 1976 Nobel Lecture

The paper investigates the role played by Friedman’s interpretation of the Brazilian inflation in his 1967 formulation of the natural rate hypothesis and in his 1976 discussion of indexation and other institutional arrangements in the face of chronic inflation. It is argued that, as an empirical economist and in the absence of evidence from industrialized countries, Friedman found in the Brazilian 1964-66 stabilization episode significant support for his argument about inflation acceleration and a shifting Phillips curve. Friedman’s interest in the Brazilian inflationary economy prompted him to visit the country in 1973. The context and implications of Friedman’s Brazilian travel are also tackled in the paper.

THE RELATIONSHIP BETWEEN EXCHAGE RATES AND INFLATION: THE CASE OF IRAN

Iran is a country, which has experienced high, and chronic inflation period and fluctuating Exchange rates during past decades. After the revolution in Iran in 1979, followed by eight-year Iran-Iraq war and world oil crises, high inflation has been one of the Iran’s most important problems. Especially during past years boycotts against trade caused instable Exchange rates and high inflation in Iran. These issues attract economists’ interest toward this subject. Therefore, the aim of this study is to analyze the relationship between Exchange rate and inflation based on time series data, using Hendry General to Specific Modeling method and Vector Autoregression (VAR) model. To this end, we used annual data for the period 1976-2012 for Hendry method. We also used the quarterly data between 1997: 3 - 2011: 4 to estimate VAR model. Due to economic instability in recent years and lack of valid data we estimated model up to 2012. As a result of the Hendry model, it is obtained that there is a direct relationship between Exchange rate and inflation. An increase in foreign exchange rates makes the inflation goes up. By including the money supply variable to VAR model the effects of money supply and the exchange rate on inflation has been investigated as well. According to the results, both the money supply and the exchange rate affect the inflation in the positive direction. Contribution of the money supply on inflation is greater than the exchange rate. Keywords: Exchange Rate, inflation, Hendry Method, Time Series, VAR model

Long-Term Relationship between Inflation and Public Sector Deficit in the Turkish Economy and its Macroeconomic Implications (1975-2014)

The process of deterioration in the fundamentals, in particular those related to inflation and the public sector deficits, that had started in the 1980's have accelerated in the 1990's. Meanwhile two way causative relations seem to have appeared between the fluctuations of some fundamentals. In this context, this paper examines the long term relationship between inflation and the public sector deficit and provides an analysis of the macro dynamics that derive from this relationship. Following a summary of the theoretical literature on the relationship between inflation and the public sector deficit, the behavior of these two variables in the 1975-2014 periods are delineated and an analysis of their relationship to some selected macro-variables is presented. The most important result of this article is that high and chronic inflation rates are one of the responsible of deterioration which appeared on the main economic variables particularly in the public sector balance. Similarly, in the 2000’s, on the basis of positive developments in the public balance lies in falling inflation rates quickly and permanently.

EXCHANGE RATE-BASED STABILIZATIONS: A LITERATURE REVIEW

The exchange rate-based stabilizations (ERBSs) that have been undertaken in chronic inflation countries have generated a controversial body of literature regarding the effects of disinflation programs, especially those on real consumption and output. This survey provides an extensive overview of the literature on ERBS. The paper covers various empirical studies that have attempted to document the macroeconomic regularities associated with ERBS, discussing both their strengths and their weaknesses. It analyzes diverse theoretical models that have been put forward to replicate the business cycles associated with ERBS, and sheds light on which models perform better using real data. The results suggest that durables incorporated weak credibility and sticky price model proves to be most compatible with the empirical regularities observed in the course of ERBS.

From Financial Crisis to Financial Stability (Turkish Experience)

This paper try to give a picture of Turkish crisis during 2000-2001 and the reforms were fulfilled after that especially in financial system sector. Survey about experiences such as turkey can have many useful lessons for countries like Iran and other developing countries that have similar conditions. Turkish experience show us in a unstable economic environment that has been characterized by runaway and chronic inflation ; high past through exchange rate; fragility in banking system and heavy fiscal dominance; could implement a structural reforms during a short period and come bake to the right way and reach to the amazing results as soon as possible. [1] The conducted exit strategy in turkey consist of three main channel including 1) fiscal reforms; 2)adoption a sustainable monetary policy based on floating exchange rate and tightening monetary base and 3)finally banking sector restructuring. [2] The consequence of conducted reforms can be shown in slowdown inflation rate and achievement to a stable economic growth. It’s necessary to be mentioned that turkey before 2001 reforms had experienced several efforts to achieve a suitable economic conditions but all of them had failed. The structure of this paper is including: i) in the first section; the conditions before crisis that Turkish economy had be faced with them are drawn. ii) And in the second sector; the main performances were done to pass the crisis especially in the financial sector has been discussed. iii) Finally the lessons taken from Turkish will be explained. Keywords: monetary policy; banking system; inflation targeting [1] The best evidence for this comment can be shown with the trend of inflation during 2002-2004 periods. while in the November of 2000; inflation was 68 percent ;in the end of 2004 this index reached to the 14% [2] The banking restructuring program was initiated in May 2001.

FROM FINANCIAL CRISIS TO FINANCIAL STABILITY (TURKISH EXPERIENCE)

This paper try to give a picture of Turkish crisis during 2000-2001 and the reforms were fulfilled after that especially in financial system sector. Survey about experiences such as turkey can have many useful lessons for countries like Iran and other developing countries that have similar conditions. Turkish experience show us in a unstable economic environment that has been characterized by runaway and chronic inflation ; high past through exchange rate; fragility in banking system and heavy fiscal dominance; could implement a structural reforms during a short period and come bake to the right way and reach to the amazing results as soon as possible. [1] The conducted exit strategy in turkey consist of three main channel including 1) fiscal reforms; 2)adoption a sustainable monetary policy based on floating exchange rate and tightening monetary base and 3)finally banking sector restructuring. [2] The consequence of conducted reforms can be shown in slowdown inflation rate and achievement to a stable economic growth. It’s necessary to be mentioned that turkey before 2001 reforms had experienced several efforts to achieve a suitable economic conditions but all of them had failed. The structure of this paper is including: i) in the first section; the conditions before crisis that Turkish economy had be faced with them are drawn. ii) And in the second sector; the main performances were done to pass the crisis especially in the financial sector has been discussed. iii) Finally the lessons taken from Turkish will be explained. [1] The best evidence for this comment can be shown with the trend of inflation during 2002-2004 periods. while in the November of 2000; inflation was 68 percent ;in the end of 2004 this index reached to the 14% [2] The banking restructuring program was initiated in May 2001.

Do Exchange Rates Affect Inflation Evidence from Emerging Market Economies

After the 1980s, chronic inflation in Turkey has shaken confidence in the domestic currency, and thus operating debit-credit transactions through dollars. The aim of this paper is to analyse the impact of exchange rate pass-through into inflation in both Turkey and emerging market economies that were highly dollarized and shifted to a flexible exchange rate regime, together with inflation targeting policy in an attempt to switch to the advanced economy. This paper also studies whether stabilization programs under flexible exchange rate regimes and particularly inflation targeting policy may have eliminated dollarization in the periods 1995-2001 and 20022010.

The Sources of Recent Inflation in Vietnam: Evidence from a VAR with Sign Restrictions

This paper studies the sources of high and chronic inflation in Vietnam in recent years using the structural VAR method identified by sign restrictions. The novelty of the paper is that the sign restrictions are drawn from a New Keynesian small open economy DSGE model built and calibrated to the data of Vietnam. Variance decomposition results show that supply shocks and demand shocks seem to explain a large part of inflation over the whole sample period, while the contribution of monetary shocks is much smaller but not negligible. Historical decomposition results show that demand shocks and, to a lesser extent, monetary shocks seem to be the main determinants of inflation in the period 2004Q1-2008Q3, while supply shocks appear to be more important in the period 2008Q1-2010Q4.

Rebuttal from Gunst and Panettieri

Rebuttal from Gunst and Panettieri

Celso Furtado and the Structuralist-Monetarist Debate on Economic Stabilization in Latin America

This article investigates Celso Furtado's role in the broad controversy between structuralists and monetarists about inflation and stabilization that took place in Latin America between the mid-1950s and early 1960s. Furtado was the first to relate Latin American chronic inflation to the new growth pattern of the region after the acceleration of the industrialization process in the 1930s. The Brazilian economist criticized the applicability of the monetary approach to the balance of payments to developing countries and put forward an alternative interpretation of the connection between external disequilibrium and inflation. Furtado formulated and tried to implement in 1962–63 the first structuralist stabilization plan—called the Three-Year Plan—in a Latin American country, based on “gradualism” and regarded as an alternative to stabilization policies sponsored by the IMF in the region.

The Structure of Public Sector Debt in Brazil

The literature on the end of remarkable inflationary processes (Bresciani-Turroni, 1937; Sargent, 1986) calls our attention to one of the favorable aspects of hyperinflations: the fact that high inflation destroys old debts. Because of the central role fiscal deficits play in chronic inflation, the alleviation of the debt burden helps stabilization, and the fact that a large portion of government debt may disappear without the undesirable reputation costs of explicit debt repudiation is even better. In the Brazilian inflationary experience, most of this potentially favorable effect of high inflation on debt has been neutralized by indexation. In December 1994, officially recognized total federal domestic debt was 19. 9% of GDP. The fast growth of public debt in the first four years of stabilization has offset the benefits of the inflation acceleration, which occurred shortly before the onset of monetary reform in July, 1994. By December 1998, this figure was 44. 8% of GDP.