But whether disinflation is easier in the absence of indexation, or whether the absence of indexation indicates a government's commitment not to live with inflation, is difficult to say, write Dornbusch and Fischer. These revenues, especially high at the start of most of the inflationary episodes, slowed the fiscal effort that had to be made to reduce inflation. But there is little evidence in the literature that revenue considerations were important in the inflationary thinking of any government. This may reflect a general lack of understanding of the inflationary process, or it may mean that seigniorage is rarely an explicit reason for a government to pursue inflationary policies. Dornbusch and Fischer believe the second interpretation.
Countries typically find themselves in moderate or high inflations as a result of external shocks.
When the next inflationary shocks hit, it takes explicit counterinflationary policies to prevent inflation from rising. Moderate inflation is not a state that economies stay in without a government commitment to prevent further increases in inflation. Governments have successfully reduced moderate inflations to low through a combination of tight fiscal policy, incomes policy, and generally some exchange rate commitment. But there is little support for the view that an exchange rate commitment, or an incomes policy, alone allows a country to move at low cost from moderate to low inflation. Orthodox stabilization policies are very successful in stopping extreme inflation.