Skip navigation

Is Disinflation Good for the Stock Market?

Authors: Henry, Peter
Issue Date: Jan-2007
Publisher: Center on Democracy, Development, and Rule of Law
Abstract: The stock market appreciates by an average of 24 percent in real dollar terms when countries attempt to stabilize annual inflation rates that are greater than 40 percent. In contrast, the average market response is 0 when the pre-stabilization rate of inflation is less than 40 percent. These results suggest that the potential long-run benefits of stabilization may dominate short-run costs at high levels of inflation, but at low to moderate levels of inflation, benefits may be offset by costs in a present value sense. Stock market responses also help predict the change in inflation and output in the year following all 81 stabilization efforts.
Appears in Collections:Peter Henry's Collection

Files in This Item:
File Description SizeFormat 
PH Is Disinflation Good.pdfPeter Henry Is Disinflation Good for the Stock Market?396.04 kBAdobe PDFView/Open

Items in FDA are protected by copyright, with all rights reserved, unless otherwise indicated.