Who gives transfer payments?
Transfer payments are given by government of various levels to under-privileged society members like unemployed workers, the elderly who’s unable to maintain a decent life by inability to work and such.
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Why currency appreciates in real terms during inflation stabilization?
A common thread in the exchange rate-based stabilization experiences we have reviewed is a real currency appreciation accompanied by a growing deficit on current account. Only countries like Israel and Chile, which have avoided drastic real currency appreciation, have been able to reduce inflation without generating subsequent crisis and pressures for policy reversals. Thus, an understanding of why real appreciation occurs after the government targets the exchange rate is central to understanding why many stabilization efforts fail. There are three main theories explaining real appreciation. Read the rest of this entry »
