Standard analyses of high inflation episodes usually assume that the real interest rate is either a constant or suffers changes small enough to be safely ignored. However, in several highly indebted countries, the real interest rate is perhaps the single most important variable affecting the government budget.

This paper studies the experience of several heterodox stabilization plans that not only failed to achieve price stability but that induced the economy to accelerating inflation. The income policy approach to stabilization, of the sort followed by populist governments, also failed to improve the well being of low income people.

This paper studies the problem of foreign exchange policy emphasizing the portfolio and liquidity services of domestic and foreign currency. It shows that the impact of increasing borrowing to finance deficits requires a higher rate of devaluation for the domestic currency. The analysis provides a generalization of the Unpleasant Monetarist Arithmetic of Sargent and Wallace for an open economy and with unique solutions on both sides of the Laffer curve.

Hacia fines de Abril de 1989, ante la perspectiva de un estallido hiperinflacionario, las autoridades monetarias argentinas introdujeron severas restricciones al retiro en efectivo de los depósitos bancarios. Esto provocó temporalmente el surgimiento de un sistema monetario "bipapélico" en el que circularon dos monedas, popularmente llamadas el "austral billete" y el "austral cheque." El funcionamiento tal sistema es conceptualmente similar al del antiguo patrón "bimetálico," y por tanto un caso particular del problema general de la sustitución de monedas.

Uruguay has a long history of inflation. The average compound growth rate in the CPI for the period 1950-89 was of 42.8% per year. Levels below the two digits were attained in only three of those years, all of them in the 1950’s. On the other hand, inflation levels in the three digits were attained only in 1967 and 1974.

Argentina has had a sad economic history in recent decades. As of 1989 real per-capita GDP stays at a level similar to that of the early 1960's. This means a quarter of a century without growth at a time when the rest of the world has seen one of the most glowing periods in terms of economic achievements. Per-capita GDP reached a historical level in 1974 and has never again been able to surpass this level in spite of reaching it again in 1977 and 1979. Since 1980 GDP per capita starts a steep decline that results in an accumulated fall of 23.5% in the ten year period 1979-88.

Una de las hipótesis frecuentemente mencionadas respecto de los efectos redistributivos de la inflación sostiene que en el curso de un proceso inflacionario el ajuste de los precios antecede al ajuste salarial y, por consiguiente, los salarios reales caen y los márgenes reales de beneficio aumentan. En el caso de un proceso hiperinflacionario aumenta la frecuencia y la conflictividad de los ajustes de precios y salarios. En un marco caracterizado por cambios de precios relativos grandes y persistentes resulta difícil establecer contratos bien definidos en términos reales.