(1) Dept. of Economics, Claremont McKenna College, 500 E. Ninth Street, Claremont, CA, 91711, U.S.A.;(2) Claremont Institute for Economic Policy Studies, Claremont Graduate University, 160 E. Tenth Street, Claremont, CA, 91711, U.S.A
Abstract:
The Chinese inflation of 1949-1950 was fueled by large budget deficits but was ended in March 1950 before significant deficit
reduction occurred. We discuss the fiscal strains that gave rise to this inflation and consider the role played by early Communist
market-based anti-inflationary measures such as the 'economic warfare' against speculators conducted by the government's state
trading companies. While later monetary and fiscal tightening sustained the stabilization achieved in March – at considerable
cost to the real economy – the Chinese experience seems to confirm that there is more to inflation stabilization than fiscal
balance alone.
This revised version was published online in July 2006 with corrections to the Cover Date.