Brazil's Tropical Plan
AbstractThis paper highlights the institutional features of the inflation process and contrasts two stabilization efforts in 1964-66 and in 1986.The inflation process in Brazil is highly institutional. It does not resemble hyperinflations where pricing and wage setting are geared to the exchange rate by the hour, making it possible to stop inflation by simply containing money creation and fixing the exchange rate. The two stabilization programs demonstrate that an incomes policy is an essential ingredient to non-recessionary stabilization. But they also show that demand restraint is inevitable if disinflation is to be viable. The 1964 program was gradualist and two-handed, relying on the supply side on wage repression. The 1986 plan was a heterodox shock treatment centered around an uncompromising price freeze and paying insufficient attention to the need for fiscal restraint.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2142.
Date of creation: Jan 1987
Date of revision:
Publication status: published as Cardoso, Eliana A. and Rudiger Dornbusch. "Brazil's Tropical Plan," American Economic Review, Vol. 77, No. 2, May 1987, pp. 288-292.
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