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Inflation, structural change and conflict in post-disinflation Brazil: a structuralist appraisal

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  • André Roncaglia de Carvalho

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    Abstract

    The paper analyzes some of the structural causes of inflationary persistence in Brazil in the post-Real plan period, in contrast to the Brazilian Central Bank’s view on the causes of inflation, particularly in what concerns its inertial component. It begins with a historical perspective on the convergence of stabilization theory to the so-called “macroeconomic consensus” and the understanding of inflation by this approach. We make the case that inflation can be better understood in its root causes only if the terms of distributional conflict and inter-sectoral dynamics are considered, which include the structural changes undergone by the Brazilian economy after the Real plan. Two primary pressures are therefore analyzed, namely: (i) the increase in the tertiary sector´s share of total value added in aggregate output combined with (ii) an intensive policy of income distribution. The interplay of supply and demand forces in a widely-indexed economic environment paints a more detailed picture of the current challenges faced by the ongoing monetary policy regime in Brazil than the one found in new Keynesian models.

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    File URL: http://www.fea.usp.br/feaecon/RePEc/documentos/AndreRoncagliaCarvalho25WP.pdf
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    Bibliographic Info

    Paper provided by University of São Paulo (FEA-USP) in its series Working Papers, Department of Economics with number 2013_25.

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    Date of creation: 20 Dec 2013
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    Handle: RePEc:spa:wpaper:2013wpecon25

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    Keywords: inflation inertia; structural change; conflicting claims; Real plan; Brazil;

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    1. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
    2. Teichman, Judith, 2008. "Redistributive Conflict and Social Policy in Latin America," World Development, Elsevier, vol. 36(3), pages 446-460, March.
    3. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," NBER Working Papers 8403, National Bureau of Economic Research, Inc.
    4. M. Woodford., 2010. "Convergence in Macroeconomics: Elements of the New Synthesis," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
    5. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
    6. Ana Katarina Campêlo & Francisco Cribari-Neto, 2003. "Inflation Inertia and Inliers: The Case of Brazil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 57(4), pages 713-739, October.
    7. Durevall, Dick, 1999. "Inertial inflation, indexation and price stickiness: evidence from Brazil," Journal of Development Economics, Elsevier, vol. 60(2), pages 407-421, December.
    8. Afonso S. Bevilaqua & Mário Mesquita & André Minella, 2007. "Brazil: taming inflation expectations," Working Papers Series 129, Central Bank of Brazil, Research Department.
      • Afonso S Bevilaqua & Mário Mesquita & André Minella, 2008. "Brazil: taming inflation expectations," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 139-158 Bank for International Settlements.
    9. Marvin Goodfriend, 2007. "How the World Achieved Consensus on Monetary Policy," NBER Working Papers 13580, National Bureau of Economic Research, Inc.
    10. Pedro Garcia Duarte, 2011. "Not Going Away? Microfoundations in the Making of a New Consensus in Macroeconomics," Working Papers, Department of Economics 2011_02, University of São Paulo (FEA-USP).
    11. Fischer, Stanley, 1977. "Wage indexation and macroeconomics stability," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 5(1), pages 107-147, January.
    12. Alexandre A. Tombini & Sergio A. Lago Alves, 2006. "The Recent Brazilian Disinflation Process and Costs," Working Papers Series 109, Central Bank of Brazil, Research Department.
    13. Robert Rowthorn & Ramana Ramaswamy, 1999. "Growth, Trade, and Deindustrialization," IMF Staff Papers, Palgrave Macmillan, vol. 46(1), pages 2.
    14. Nelson Barbosa-Filho, 2008. "Inflation targeting in Brazil: 1999-2006," International Review of Applied Economics, Taylor & Francis Journals, vol. 22(2), pages 187-200.
    15. Dante Aldrighi & Renato P. Colistete, 2013. "Industrial Growth and Structural Change: Brazil in a Long-Run Perspective," Working Papers, Department of Economics 2013_10, University of São Paulo (FEA-USP).
    16. Alex Segura-Ubiergo, 2012. "The Puzzle of Brazil's High Interest Rates," IMF Working Papers 12/62, International Monetary Fund.
    17. John McCombie & Maureen Pike, 2013. "N o End to the Consensus in Macroeconomic Theory? A Methodological Inquiry," American Journal of Economics and Sociology, Wiley Blackwell, vol. 72(2), pages 497-528, 04.
    18. Francisco Cribari-Neto & Keila M. Cassiano, 2005. "Uma Análise da Dinâmica Inflacionária Brasileira," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 59(4), pages 535-566, October.
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