Fiscal Policy and the Theory of Conflict Inflation

Daniel Arce

The Manchester School of Economic & Social Studies, 1994, vol. 62, issue 4, 425-37

Abstract: The author presents a model that formalizes the role of deficits in the conflict theory of inflation. In it, government behavior is endogenous and special interests force a link between fiscal policy and inconsistent income claims in the private sector. Government attempts to alleviate social tensions through fiscal expenditure contribute to the propagation of inflation. The model facilitates an analysis of the type of 'heterodox' stabilization policies attempted in Latin America. These policies are shown to be inherently unstable unless structural changes are made to discipline the propagating effects of fiscal policy. Copyright 1994 by Blackwell Publishers Ltd and The Victoria University of Manchester

Date: 1994
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Persistent link: https://EconPapers.repec.org/RePEc:bla:manch2:v:62:y:1994:i:4:p:425-37

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