The Conquest of South American Inflation (original) (raw)
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This paper develops a hidden Markov model to analyze inflation dynamics in five South American countries: Argentina, Bolivia, Brazil, Chile, and Peru. It contrasts the role of indexation versus monetized deficits in driving inflation, asserting that indexation is a primary driver. By employing an adaptive expectations framework alongside rational expectations, the model captures the complexities of hyperinflations and their stabilization, offering insights into the historical episodes across different countries.
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