Secondary currencies in the Russian hyperinflation and stabilization of 1921-24

The introduction of a secondary currency, the chevronets, played an important and beneficial role during hyperinflation in Soviet Russia in the early 1920s. This sophisticated strategy was crowned by the execution of a successful stabilization in March 1924, despite the persistence of a substantial budget deficit. The stabilization was much less costly than appears to have been the case in other post Great War hyperinflations. further, the use of a secondary currency in this case allowed real money and output to increase in the course of 1923, while these were greatly disrupted in the late phase of hyperinflation in cases like Germany and Poland in the period. The theoretical approach to secondary currencies developed here (and in Auerbach, Davison and Rostowski 1992) further suggests that this may have important implications for policy today.