Showing papers by "William Easterly published in 1996"
TL;DR: In this paper, the authors characterize the literature on inflation and growth and look at the aspects of the literature that motivated them to pursue one particular angle in their own recent work: the behavior of growth before, during, and after discrete high inflation crises.
Abstract: A re inflation and growth inversely associated, directly associated, or not associated? Is the empirical inflationgrowth relationship primarily a long-run relationship across countries, a shortrun relationship across time, or both? Like a bickering couple, inflation and growth just cannot seem to decide what their relationship should be. In this article, we characterize the literature on inflation and growth. Aware of the limits of our comparative advantage, we do not intend to do a general survey of the literature. Instead, we look at the aspects of the literature that motivated us to pursue one particular angle in our own recent work: the behavior of growth before, during, and after discrete high inflation crises.
192 citations
TL;DR: Easterly et al. as discussed by the authors found that countries which stabilize from high inflation usually have output expansions in the first and subsequent years of stabilization, in both exchange-rate-based and money-based stabilizations.
Abstract: Countries which stabilize from high inflation – here defined as an annual rate above 40% – usually have output expansions in the first and subsequent years of stabilization. These expansions occur in both exchange-rate-based and money-based stabilizations. The paper reaches these conclusions after examining a sample of all 28 episodes in the international data that meet a pre-defined criterion for stabilization from high inflation. The results do not change with alternative growth and stabilization definitions. The paper documents similar expansionary stabilizations in historical data and in the recent experience of the former Communist economies. Expansionary stabilizations may be an indirect confirmation of recent theories of political economy that predict that stabilization will not occur until the gains are very large.
—William Easterly
81 citations
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TL;DR: The authors found that countries that had external debt crises with high inflation both reformed more and recovered better than countries with low inflation, and that countries with extremely high inflation also wound up with lower inflation than countries that has moderately high inflation.
Abstract: 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.
64 citations
TL;DR: The authors found that countries that had external debt crises with high inflation both reformed more and recovered better than countries with low inflation, and that countries with extremely high inflation also wound up with lower inflation than countries that has moderately high inflation.
Abstract: 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.(This abstract was borrowed from another version of this item.)
53 citations
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TL;DR: For instance, the authors argued that ethnic divisions explain a significatn part of Africa's slow growth and Africa's choice of growth-reducing policies and that Africa's poor growth is associated with Africa's low schooling, political instability, underdeveloped financial systems, distorted foreign exchange markets, high government deficits, insufficient infrastructure, and poor institutions.
Abstract: Ethnic divisions explain a significatn part of Africa's slow growth and Africa's choice of growth-reducing policies. Africa's poor growth is associated with Africa's low schooling, political instability, underdeveloped financial systems, distorted foreign exchange markets, high government deficits, insufficient infrastructure, and poor institutions.
22 citations
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TL;DR: Easterly, Loayza, and Montiel as mentioned in this paper use a dynamic panel methodology that both controls for unobserved time-and country-specific effects and accounts for the likely joint endogeneity of the explanatory variables.
Abstract: The response of economic growth to reforms in Latin America has not been disappointing. Because of those policy changes, and despite a global slowdown, Latin America did well to return to its historic growth rate of 2 percent per capita in 1990-93. After years of poor macroeconomic performance, many Latin American countries undertook ambitious programs of macroeconomic stabilization and structural reform in recent years. This change in policy created high expectations for the region, and some observers have questioned whether actual growth outcomes in several Latin American countries have lived up to these expectations. Easterly, Loayza, and Montiel offer evidence that the response of economic growth to reforms in Latin America has not been disappointing. Because of those significant policy changes, and despite a global slowdown, Latin America did well to return to its historic growth rate of 2 percent per capita in 1990-93. Latin American growth has responded to changes in policy variables, as would have been predicted by the experience of other times and places. Those earlier experiences are summarized by a panel regression spanning many countries and multiyear periods from 1960 to 1993. To get consistent estimates of the parameters linking growth and policy variables, the authors use a dynamic panel methodology that both controls for unobserved time- and country-specific effects and accounts for the likely joint endogeneity of the explanatory variables. This paper - a product of the Macroeconomics and Growth Division, Policy Research Department - is part of a larger effort in the department to understand the determinants of economic growth.
13 citations
TL;DR: In this article, the authors examined the relationship between inflation and monetary growth in the Ruble exchange rate and showed that the two models are observationally equivalent in the short run, and that the subsequent increase in monetary growth satisfied increased real ruble demand, with limited inflation impact.
Abstract: The ruble exchange rate has undergone wide gyrations over the last few years, culminating in a period of rapid appreciation in early 1995. We examine this period, distinguishing between two alternative views, an overshooting view with backward looking expectations, and a portfolio model based on demand for ruble assets. We show that sturdy lag structures between inflation and monetary growth imply that the two models are observationally equivalent in the short run. Using indirect information from other asset markets, however, allows us to differentiate between the two explanations. We find fairly sturdy evidence that expectations regarding future inflation shifted downward in early 1995, suggesting that the subsequent increase in monetary growth to a significant extent satisfied increased real ruble demand, with limited inflation impact. Copyright @ 1996 by John Wiley & Sons, Ltd. All rights reserved.
5 citations
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TL;DR: The ride of the Russian Ruble has been nothing if not exciting as mentioned in this paper, and after a near meltdown of the ruble on Black Tuesday (Octorber 11, 1994) and further tremors in early 1995, the Russian ruble has staged a remarkable comeback.
Abstract: The ride of the ruble has been nothing if not exciting. After a near meltdown of the ruble on Black Tuesday (Octorber 11, 1994) and further tremors in early 1995, the ruble has staged a remarkable comeback. It appreciated by some 7 percent in nominal terms and by more than 25 percent in real terms from April through June 1995 despite substantial central bank dollar purchases. Partly as response to the ruble recovery, a exchange rate band spanning teh range from 4300 to 4900 rubles per dollar was introduced on July 5th, with the spot rate at 4565.
1 citations
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TL;DR: In this article, the authors characterize the literature on inflation and growth and look at the aspects of the literature that motivated them to pursue one particular angle in their own recent work: the behavior of growth before, during, and after discrete high inflation crises.
Abstract: A re inflation and growth inversely associated, directly associated, or not associated? Is the empirical inflationgrowth relationship primarily a long-run relationship across countries, a shortrun relationship across time, or both? Like a bickering couple, inflation and growth just cannot seem to decide what their relationship should be. In this article, we characterize the literature on inflation and growth. Aware of the limits of our comparative advantage, we do not intend to do a general survey of the literature. Instead, we look at the aspects of the literature that motivated us to pursue one particular angle in our own recent work: the behavior of growth before, during, and after discrete high inflation crises.
1 citations