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Өлкетану үйірмесі-Amanelova Asem, Өлкетану үйірмесі-Amanelova Asem
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Unit 7 Economics and Finance 1. Read, translate and g ive the summary of the text ―The Elements of a Stabilization Program‖. The Elements of a Stabilization Program What needs to be done to end hyperinflation follows from our analysis of the causes of hyperinflation: There must be a fiscal reform and a credible reduction of the government‟s budget deficit. This reform must take place on both the expenditure side and the revenue side of the budget. 59
On the expenditure side, reform typically implies reducing the government subsides that have often mushroomed during the hyperinflation. Obtaining a temporary suspension of interest payments on foreign debt also helps to decrease expenditures. An important component of stabilization in Germany in 1923 was the reduction in its “reparation payments” – precisely those payments that had triggered the hyperinflation in the first place. On the revenue side, what is required is not so much an increase in overall taxation but rather a change in the composition of taxation. This is an important point: As you saw, during a hyperinflation, people are in the effect paying a tax – the inflation tax. Stabilization involves replacing the inflation tax with other taxes. This cannot be done overnight, but it is essential that people become convinced that it will be done and that the budget deficit will be reduced. The central bank must make a credible commitment that it will no longer automatically monetize the government debt. This credibility can be achieved in a number of ways. The central bank can be prohibited, by decree, from buying any government debt, so that no monetization of the debt is possible. Or the central bank can peg the exchange rate to the currency of a country with low inflation. An even more drastic step is to officially adopt dollarization – that is, making a fore
ign currency the country‟s official currency. This step is drastic because it implies giving up seignorage altogether, and it is often perceived as a decrease in the country‟s independence. Are other measures needed as well? Some economists argue that жүктеу/скачать 0,86 Mb. Достарыңызбен бөлісу:
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