The Georgian Hyperinflation and Stabilization
34 Pages Posted: 13 Feb 2006
Date Written: May 1999
This paper anlayzes the Georgian hyperinflation of 1993-94, which featured endogenous fiscal expenditures and the money supply, depreciation, and currency substitution. Hyperinflation was stopped by removing generalized consumer subsidies and tightening of monetary policy, and not by a sudden rush of credibility or imposition of an exchange rate anchor. A de facto exchange rate anchor served ex post as a vehicle for building credibility, which ensured a dramatic reversal of currency substitution when the currency reform was implemented. The paper also discusses the relatively rapid output recovery in Georgia.
Keywords: Hyperinflation, Stabilization, Exchange Rate Anchor, Credibility, Resumption of Growth
JEL Classification: E31, E65, F41
Suggested Citation: Suggested Citation