TY  - JOUR
AU  - Sargent,Thomas
AU  - Williams,Noah
AU  - Zha,Tao
TI  - The Conquest of South American Inflation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12606
PY  - 2006
Y2  - October 2006
UR  - http://www.nber.org/papers/w12606
L1  - http://www.nber.org/papers/w12606.pdf
N1  - Author contact info:
Thomas J. Sargent
Department of Economics
New York University
19 W. 4th Street, 6th Floor
New York, NY  10012
Tel: 612/373-4383
Fax: 650/723-1687
E-Mail: thomas.sargent@nyu.edu

Noah M. Williams
Department of Economics
1180 Observatory Drive
University of Wisconsin
Madison, WI 53706-1393
Tel: 608/263-3864
E-Mail: nmwilliams@wisc.edu

Tao Zha
Emory University
1602 Fishburne Drive
Atlanta, GA 30322-2240
Tel: 404/723-3254
Fax: 404/727-4639
E-Mail: tzha@emory.edu
M3  - presented at "SI 2006 ME call for papers", July 10-14, 2006
AB  - We infer determinants of Latin American hyperinflations and stabilizations by using the method of maximum likelihood to estimate a hidden Markov model that potentially assigns roles both to fundamentals in the form of government deficits that are financed by money creation and to destabilizing expectations dynamics that can occasionally divorce inflation from fundamentals.  Our maximum likelihood estimates allow us to interpret observed inflation rates in terms of variations in the deficits, sequences of shocks that trigger temporary episodes of expectations driven hyperinflations, and occasional superficial reforms that cut inflation without reforming deficits. Our estimates also allow us to infer the deficit adjustments that seem to have permanently stabilized inflation processes.
ER  -