Inflation Stabilization and Nominal Anchors

@inproceedings{Calvo1994InflationSA,
  title={Inflation Stabilization and Nominal Anchors},
  author={Guillermo A. Calvo and Carlos A. V{\'e}gh},
  year={1994}
}
This paper analyzes the choice of a nominal anchor in disinflation programs in chronic inflation countries. Both theory and evidence suggest several conclusions. (i) The recessionary effects associated with disinflation appear in the early stages of money-based programs but only in the late stages of exchange rate-based programs. (ii) Lack of credibility is more disruptive under fixed exchange rates than under floating exchange rates. (iii) Attempting to pursue a disinflationary policy while… CONTINUE READING

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