Economics, Econometrics and Finance
4 years ago

Disinflation Programs Lead to High Real Interest Rates: Lack of Credibility?

International Finance Discussion Paper
High Real Interest Rates in the Aftermath of Disinflation: Is It a Lack of Credibility?
Graciela Kaminsky, Leonardo Leiderman

Paper Summary

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Disinflation Programs Lead to High Real Interest Rates: Lack of Credibility?

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High real interest rates have been observed after countries try to lower inflation. These high rates might be due to a lack of trust in the new low-inflation policy. Researchers looked at data from Argentina, Israel, and Mexico in the 1980s to test this idea.