Inflation and Monetary Reform
University of Manchester - School of Social Sciences
affiliation not provided to SSRN
IMF Working Paper No. 92/60
The introduction of a new currency has often occurred as part of a program to fight hyperinflation. In this context, non-uniform conversion rates for different types of assets and liabilities have been used as a means of reducing an initial "excess" stock of liquidity. The paper examines the anticipatory dynamics associated with such reforms. The analysis suggests that monetary reforms of this type have a deflationary effect upon announcement as well as during the transition period. Under uncertainty about the reform date, the direction of the initial jump in prices upon announcement is a priori ambiguous. Upon implementation, a monetary reform leads to a downward jump in prices.
Number of Pages in PDF File: 34
JEL Classification: E31, E51, F31working papers series
Date posted: February 15, 2006
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