Sources of inflation and the effects of balanced budgets and inflation targeting in developing economies

The macroeconomics of low inflation

Guilherme Martins and Peter Skott

Industrial and Corporate Change, 2021, vol. 30, issue 2, 409-444

Abstract: This article presents a model in which distributional conflict and cross-sectoral interactions between demand and supply side forces determine inflation in developing countries. We show that the standard macroeconomic policy recommendations of inflation targeting and balanced budgets (i) increase volatility by amplifying external shocks and (ii) can lead to premature deindustrialization. The recent Brazilian experience is used to illustrate the argument.

JEL-codes: E63 O14 O23 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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Working Paper: Sources of inflation and the effects of balanced budgets and inflation targeting in developing economies (2020)
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