Inflation's Children: Tales of Crises that Beget Reforms
12 Pages Posted: 15 Sep 2000
Date Written: February 1996
Are broad reforms the children of high inflation? Do growth recoveries follow? We find that countries that had external debt crises with high inflation both reformed more and recovered better than countries that had external debt crises with low inflation. Countries with extremely high inflation also later wound up with lower inflation than countries that has moderately high inflation. The low inflation debtor countries had more aid than the high inflation debtor countries, which may have created stronger incentives to reform in the high inflation countries. Recent reforms look like they are the children of high inflation, even if further paternity tests are in order.
Suggested Citation: Suggested Citation