The conquest of South American inflation

Thomas Sargent, Noah Williams, Tao Zha

    Research output: Contribution to journalArticlepeer-review


    We infer determinants of Latin American hyperinflations and stabilizations by using the method of maximum likelihood to estimate a hidden Markov model that 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. Levels and conditional volatilities of monetized deficits drove most hyperinflations and stabilizations, with

    Original languageEnglish (US)
    Pages (from-to)211-256
    Number of pages46
    JournalJournal of Political Economy
    Issue number2
    StatePublished - Apr 2009

    ASJC Scopus subject areas

    • Economics and Econometrics


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