From Inertia to Megainflation: Brazil in the 1980s / Eliana Cardoso.

Format:

Book

Author/Creator:

Cardoso, Eliana.

Contributor:

National Bureau of Economic Research.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3585.

NBER working paper series no. w3585

Language:

English

Subjects (All):

Inflation (Finance)--Brazil.

Inflation (Finance).

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

From Inertia to Megainflation

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1991.

Cambridge, Massachussetts : National Bureau of Economic Research, [1991]

Summary:

This paper discusses the acceleration of inflation in Brazil. In the early 1980s, the Brazilian inflation rate increased in good measure because of the balance of payments crisis and because of large depreciations of the cruzeiro. The Cruzado Plan failed to stop inflation because of an extremely loose monetary policy coupled with a lack of fiscal austerity. Repeated price controls have increased the variability of inflation. More recently, the decline in tax collections and the growth of interest payments on a ballooning domestic debt have built up a massive fiscal problem. Flight from money has further aggravated Brazilian inflation. Two steps are used in explaining the Brazilian inflationary process: the analysis of price freezes in the context of sustained fiscal imbalance and the research on the consequences of different fiscal deficit financing forms. The paths of inflation and real cash balances in response to different shocks are simulated. The focus is on the effects of controls that impose a temporary reduction of the inflation rate under different choices for monetary and fiscal policies. A model of an open economy where agents can hold money, domestic bonds and inventories of goods clarifies the linkage between Brazil's growing inability to finance the public sector deficit externally after 1982 and the acceleration of inflation.

Notes:

Print version record

January 1991.