Not surprisingly, base money growth is also higher during inflation crises and
lower after the inflation crisis (but the difference precrisis and postcrisis is
positive and insignificant). The current account deficit, on the other hand, does
not significantly decrease after the inflation crisis. Although we can draw no
inferences about causality, the data in Table 6 show that high inflation crises are
associated with some loss of control of fiscal and monetary policy, and the end of
the crisis with regaining control.
There are many other possible influences on growth and inflation for which
we do not have good measures. What we have established is a descriptive
historical fact, not a structural relationship. As already advertised, we are not
addressing the possibility that causality runs the other direction, from poor
growth to inflation crises. It is difficult to think of good time-varying instruments
that could untangle the causality. 15