High and persistent inflation has been one of the distinguishing macroeconomic characteristics of many developing countries since the end of World War II. Countries afflicted by chronic inflation, however, have not taken their fate lightly and have engaged in repeated stabilization attempts....

This study uncovers a statistically significant negative correlation between volatility and private investment over the 1970-93 period in a set of almost fifty developing countries and provides a possible interpretation of this result by using the disappointment- aversion expected utility...

A developing country often pegs its exchange rate to a single currency, such as the U.S. dollar, even though it faces a higher inflation rate than the country to which it is pegged. As a consequence, it experiences real exchange-rate misalignments and a series of easily-anticipated devaluations....