Hiperinflação, credibilidade e estabilização

Abstract

This study examines hyperinflation, the changes in policies that overcame these episodes and the notion of credibility in economics. A common feature of all episodes of acute monetary instability is that they present processes of uncontrolled monetary expansion due to public deficits. The fundamental predicament in such cases is a fiscal crisis but emphasis is given here to the parallel question of regaining control of the monetary supply process, a less discussed aspect. From this perspective, the end of hyperinflation and the notion of credibility are examined. Hyperinflation have usually ended in a sudden rupture of the process, with the adoption of policies that lead to fiscal balance, new rules regarding the issuing of money, and currency convertibility. The study argues that credibility requires three attributes: a) it is an endogenous feature of an economic program (and not of a person), and a judgment that the government will observe its budget constraint; b) it is dependent upon an appraisal of the intertemporal solvency of the public sector; and c) it requires a degree of redundancy (overcommitment) in the policies_ In this respect, once the state of public credit has deteriorated, the expectations of inflation are not stabilized if problems of debt overhang are left unattended, because the program will command less credibility. These aspects are illustrated with the study of Germany in 1923/24, France in 1926, and Italy in 1926/27, and how they stabilized their economies. The Dawes Plan for Germany, Poincaré's Sinking Fund for France, and the consolidation of the Italian debt in 1926 are examples of how the debt overhang was dealt with in these occasions.