Can the Release of a Monetary Overhang Trigger Hyperinflation?

March 1, 1992

Preview Citation

Format: Chicago

Kent Osband, and Shoukang Lin. Can the Release of a Monetary Overhang Trigger Hyperinflation?, (USA: International Monetary Fund, 1992) accessed November 24, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

It is widely feared that, once prices are decontrolled in the formerly centrally–planned economies, households’ release of previously accumulated money will trigger a hyperinflation. This paper finds, instead, that whether a country’s fiscal, monetary, and labor market policies are destabilizing typically does not depend on the money stock. However, the release of a monetary overhang can precipitate a large initial real wage shock. To the extent such a shock is not feasible politically, there is a motive for monetary reform, which must be weighed against the cost of reduced public confidence in money.

Subject: Bonds, Financial institutions, Inflation, Labor, Prices, Real wages, Wage adjustments, Wages

Keywords: Bond holding, Bonds, Decontrol price balance, Eastern Europe, Global, Inflation, Inflation rate, Inflationary spiral, Money stock, Price liberalization, Price surge, Real wages, Wage adjustments, Wages, WP

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1992/024
Stock No:

WPIEA0241992
ISBN:

9781451920956
ISSN:

1018-5941

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