The inflation - stabilization cycles in Argentina and Brazil
AbstractThe Austral plan in Argentina and the Cruzado plan in Brazil were major stabilization attempts with lasting effects on the inflation process in both countries. The purpose of this paper is to understand the reasons that led to the large instability in inflation in both countries, and to explain why neither country succeeded in sustaining a high, but stable rate of inflation. This instability was not accompanied by a noticeable increase in the average rate of inflation. In Argentina inflation was in fact lower on average during the first three years after the Austral plan than in the previous three years, while in Brazil the increase in the average rate of inflation after the Cruzado plan was not dramatic. The paper presents the view that the type of instability that emerged following the failure of the heterodox shocks was a consequence of the large reliance on income policies for stopping inflation in the Austral and Cruzado plans and in the follow-up programs. It was the repeated use of controls accompanied by expectations and anticipations about government actions by firms and works that introduced the observed instability during this period. The paper presents a summary of the process of inflation and gives an in-depth analysis of the inflation - stabilization cycles. It concludes with thoughts about the sustainability of the regime, and the implications of these developments for the design of stabilization programmes in both countries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 443.
Date of creation: 31 Aug 1990
Date of revision:
Environmental Economics&Policies; Economic Theory&Research; Inflation; Banks&Banking Reform; Public Sector Economics&Finance;
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rudiger Dornbusch & Stanley Fischer, 1986.
"Stopping Hyperinflations Past and Present,"
NBER Working Papers
1810, National Bureau of Economic Research, Inc.
- Rudiger Dornbusch & Stanley Fischer, 1986. "Stopping hyperinflations past and present," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 122(1), pages 1-47, March.
- Cardoso, Eliana A & Dornbusch, Rudiger, 1987.
"Brazil's Tropical Plan,"
American Economic Review,
American Economic Association, vol. 77(2), pages 288-92, May.
- Rudiger Dornbusch & Mario Henrique Simonsen, 1987. "Inflation Stabilization with Incomes Policy Support: A Review of the Experience in Argentina, Brazil and Israel," NBER Working Papers 2153, National Bureau of Economic Research, Inc.
- RUGE-MURCIA, Francisco J., 1997. "Credibility and Signaling in Disinflation- a Cross Country Examination," Cahiers de recherche 9712, Universite de Montreal, Departement de sciences economiques.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).
If references are entirely missing, you can add them using this form.