Inflation in Transition Economies: How Much? and Why?

by Atish R. Ghosh

Low inflation has long been a key objective of Fund-supported programs. This emphasis on lowering inflation harkens back to the days of the Bretton Woods system when fixed exchange rates were de rigeur. Under fixed exchange rates, an inflation rate above the "world level" would result in drawings from the Fund simply bleeding out again through the balance of payments. With greater exchange rate flexibility, however, and larger swings in equilibrium real exchange rates (in the face of, or financed by, private capital flows), the case for very low rates of inflation may be less compelling.

29 pages, Kindle Edition

First published July 1, 1997