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Fiscal Policy and the Theory of Conflict Inflation


  • Arce M, Daniel G


The author presents a model that formalizes the role of deficits in the conflict theory of inflation. In it, government behavior is endogenous and special interests force a link between fiscal policy and inconsistent income claims in the private sector. Government attempts to alleviate social tensions through fiscal expenditure contribute to the propagation of inflation. The model facilitates an analysis of the type of 'heterodox' stabilization policies attempted in Latin America. These policies are shown to be inherently unstable unless structural changes are made to discipline the propagating effects of fiscal policy. Copyright 1994 by Blackwell Publishers Ltd and The Victoria University of Manchester

Suggested Citation

  • Arce M, Daniel G, 1994. "Fiscal Policy and the Theory of Conflict Inflation," The Manchester School of Economic & Social Studies, University of Manchester, vol. 62(4), pages 425-437, December.
  • Handle: RePEc:bla:manch2:v:62:y:1994:i:4:p:425-37

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    References listed on IDEAS

    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Mervyn A. King & Mark Robson, 1989. "Endogenous Growth and the role of History," NBER Working Papers 3151, National Bureau of Economic Research, Inc.
    3. Xavier Sala-i-Martin, 1990. "Lecture Notes on Economic Growth(II): Five Prototype Models of Endogenous Growth," NBER Working Papers 3564, National Bureau of Economic Research, Inc.
    4. Grier, Kevin B. & Tullock, Gordon, 1989. "An empirical analysis of cross-national economic growth, 1951-1980," Journal of Monetary Economics, Elsevier, vol. 24(2), pages 259-276, September.
    5. Russell Cooper & Andrew John, 1988. "Coordinating Coordination Failures in Keynesian Models," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 441-463.
    6. Stern, Nicholas, 1991. "The Determinants of Growth," Economic Journal, Royal Economic Society, vol. 101(404), pages 122-133, January.
    7. Kormendi, Roger C. & Meguire, Philip G., 1985. "Macroeconomic determinants of growth: Cross-country evidence," Journal of Monetary Economics, Elsevier, vol. 16(2), pages 141-163, September.
    8. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, January.
    9. Robert Summers & Alan Heston, 1991. "The Penn World Table (Mark 5): An Expanded Set of International Comparisons, 1950–1988," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 327-368.
    10. Sala-I-Martin, X., 1990. "Lecture Notes On Economic Growth: Five Prototype Models Of Endogenous Growth," Papers 622, Yale - Economic Growth Center.
    11. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Daniel Arce, 1997. "Fiscal Pacts," Open Economies Review, Springer, vol. 8(3), pages 271-284, July.
    2. Leonardo Vera, 2013. "Structural Inflation Redux," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(69), pages 37-99, December.

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