A Fiscal Theory of Hyperdeflations? Some Surprising Monetarist Arithmetic

14 Pages Posted: 17 May 2001 Last revised: 23 Feb 2023

See all articles by Willem H. Buiter

Willem H. Buiter

Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Columbia University; Independent Economic Adviser; Independent

Date Written: November 1985

Abstract

The note mines an unsuspected lode in the Sargent-Wallace "Unpleasant Monetarist Arithmetic" deposit. While that model is shown to be incapable of generating hyperinflations as a result of large monetized public sector deficits, it can generate hyperdeflations or perhaps more accurately, the first stages of an unsustainable process of hyperdeflation. The drawing of policy conclusions is left as an exercise for the reader.

Suggested Citation

Buiter, Willem H., A Fiscal Theory of Hyperdeflations? Some Surprising Monetarist Arithmetic (November 1985). NBER Working Paper No. t0052, Available at SSRN: https://ssrn.com/abstract=270351

Willem H. Buiter (Contact Author)

Centre for Economic Policy Research (CEPR)

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