Balance of Payments Constraint and Inflation

Matías Vernengo

Working Paper Series, Department of Economics, University of Utah from University of Utah, Department of Economics

Abstract: This paper describes briefly the main alternatives to the dominant neoclassical theories of inflation, according to which inflation is always a monetary phenomenon. The model develops a cost-push approach, in which raising costs are mainly related to external constraints. Distributive conflict inflation is possible, but is not explored, in order to highlight the novelty of the model. Not only inflation is seen as resulting from balance of payments crises, but fiscal crises also are the result of the initial balance of payments crises within this framework. Fiscal deficits, and all other excess demand pressures, are absent, so that high levels of inflation are compatible with an economy that is bellow full employment, and stabilization is independent of fiscal adjustments.

Keywords: Balance of payments; Inflation (search for similar items in EconPapers)
JEL-codes: E12 E31 F31 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:uta:papers:2003_06

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