It is widely feared that, once prices are decontrolled in the formerly centrally–planned economies, households’ release of previously accumulated money will trigger a hyperinflation. This paper finds, instead, that whether a country’s fiscal, monetary, and labor market policies are...

During the transition from a centrally planned economy to a market economy, many countries seem to have experienced some degree of macroeconomic instability. This paper attempts to provide a theoretical explanation of this phenomenon. The paper develops a simple monetary model and shows how...