Monetary overhang

Monetary overhang is a phenomenon in which people have more money holdings than they would normally choose to because of a lack of ability to spend it. In an economy where there is monetary overhang due to shortages, if price controls are removed, the overhang tends to produce a burst of open inflation,[1] or too much money chasing too few goods, thus raising prices. Monetary overhang can also be caused by excess credit.[2]

This is a phenomenon often present with repressed inflation and financial repression, and was common in centrally planned economies like the Soviet Union. The Soviet Union experienced monetary overhang from the mid-1980s onwards. This was reported by the IMF in 1991.[3] Subsequent to this report, the USSR collapsed.

References

  1. ^ Black, Miles; Hashimzade, Nigar; Myles, Gareth, eds. (2009). "money overhang". A Dictionary of Economics (3rd ed.). Oxford Reference website: Oxford University Press. doi:10.1093/acref/9780199237043.001.0001. ISBN 9780199237043.
  2. ^ Tooze, Adam (September 16, 2021). "How China Avoided Soviet-Style Collapse". Noema. Los Angeles: Bergruen Institute.
  3. ^ Cottareli, Carlo (June 1991). "IMF Working Paper No. 91/55: Forced Savings and Repressed Inflation in the Soviet Union: Some Empirical Results". International Monetary Fund. SSRN 884851.
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