From Inertia to Megainflation: Brazil in the 1980s

Eliana Cardoso ()

No 3585, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: 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.

Date: 1991-01
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Published as Bruno, Michael, et al. (eds.) Lessons of economic stabilization and its aftermath. Cambridge, MA and London: MIT Press, 1991.

Downloads: (external link)
http://www.nber.org/papers/w3585.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:3585

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w3585

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().