Gert Wehinger: Department of Economics, Vienna University of Economics & B.A. and Oesterreichische Nationalbank, Economic Studies Division, POB 61, A-1010 Vienna, Austria
Abstract: High inflation economies have ultimately been successful in stabilising their prices using the exchange rate as a nominal anchor. Besides stabilization, these recent examples have shown boom-recession cycles, contrary to what can be expected from (pure) money-based stabilizations. Various theoretical explanations of such boom-cycles are discussed and a model of aggregate supply and demand generating such an outcome is developed. There the boom dynamics depend mainly on a slump in real interest rates and wage flexibility.
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