Optimal Anti-Inflation Programs in Semi-Industrialized Economies: Orthodox versus Heterodox Policies

Ambler S. and E. Cardia
Journal of Development Economics (1992) 38, 41-61.

The paper characterizes the optimal time-consistent anti-inflation program in a
small, open, semi-industrialized economy when policy makers choose the rate of exchange
rate crawl, the rate of change of fiscal spending and a wage and price control parameter to
minimize deviations of output and inflation. The optimal program involves a rapidly
decelerating rate of crawl, a sharp reduction in spending, and a short initial period of wage
and price controls.