01635cas a2200241 a 4500 AALejournalIMF007778 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451981551 1018-5941 BD-DhAAL BD-DhAAL International Monetary Fund. Contacts, Credibility and Common Knowledge : Their Influenceon Inflation Convergence. Washington, D.C. : International Monetary Fund, 1989. 1 online resource (18 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper explains why sovereign issuers of reserve currencies do not use unexpected inflation to repudiate their foreign liabilities. Monetary restraint is exercised because of the fear that reserve users will switch to other currencies if an attempt is made to raise 'excessive' revenue. By the same reasoning, capital flight can serve as a deterrent to excessive money creation. It is shown that even without policy precommitment or aversion to inflation, the availability of alternative currencies can support an equilibrium with a finite, time consistent inflation rate. Mode of access: Internet IMF Working Papers; Working Paper ; No. 1989/027 Full text available on IMF http://elibrary.imf.org/view/journals/001/1989/027/001.1989.issue-027-en.xml IMF e-Library