Fighting Inflation with High Interest Rates: The Small Open Economy Case under Flexible Prices
分析高通胀国家通过提高货币利率来降低通胀和保卫本币的政策效果，发现该政策虽能暂时降低价格水平并让本币升值，但随后通胀会加速、本币贬值，因此不支持将其用于反通胀计划。
In high inflation countries, policymakers often end up paying interest on part of the money supply. Higher interest rates on money have been used both to reduce inflation and to defend the domestic currency. This paper analyzes the effectiveness of such a policy in the context of an open economy with flexible prices and exchange rates. A temporary increase in the interest rate on money reduces the price level on impact but inflation follows an explosive path afterwards. The domestic currency appreciates on impact but begins to depreciate immediately thereafter. Hence, the analysis does not support the use of high interest rates in disinflationary programs. Copyright 1995 by Ohio State University Press.