Board of Governors of the Federal Reserve System (U.S.)
International Finance Discussion Papers
High real interest rates in the aftermath of disinflation: is it a lack of credibility?
High real interest rates have been observed in many countries for several months after the adoption of disinflation programs. While they may reflect primarily a liquidity crunch, high ex post real interest rates can also be explained in terms of an ex post error in inflation expectations that reflects a lack of credibility of the low-inflation policy. The latter hypothesis is tested using data for Argentina, Israel, and Mexico during the implementation of the stabilization programs in the mid-1980s.
Cite this item
Graciela L. Kaminsky & Leonardo Leiderman, High real interest rates in the aftermath of disinflation: is it a lack of credibility?, Board of Governors of the Federal Reserve System (U.S.), International Finance Discussion Papers 543, 1996.
Keywords: Interest rates
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