Delays of Inflation Stabilizations

In some new political economic models, delays of stabilizations result from coordination problems caused by collective choice-making mechanisms. Although several previous studies have tested the effects of political instability and fragmentation on seigniorage, deficits, or inflation, no direct tests of the influence of these factors on the delays of stabilizations have previously been undertaken. This paper reports the results of such tests. The degree of fragmentation of the political system and the level of inflation are identified as important determinants of the timing of inflation stabilizations.