IDEAS home Printed from
   My bibliography  Save this article

Conflict inflation: an open economy approach


  • Leonardo Vera


Purpose - This paper seeks to draw together the various essential elements of the conflict inflation approach within the context of an open economy and to highlight the importance of global external factors in explaining inflation. Design/methodology/approach - A theoretical framework is proposed based on a model with a few simple building-blocks. A supply side relationship that determines the trade-off between a stable distribution of income and the external balance is first derived. As a second step the model combines the supply side relationship with James Meade's analysis of the relation between internal and external balance. Findings - The study first shows, in the context of an small open economy, relevant trade-offs among three crucial macroeconomics targets – external balance, internal balance, and workers/firms' aspiration balance. It then disentangles the adjustment mechanism that explains how an adverse balance of payments shocks may lead eventually to the breakdown of the conflicting claims equilibrium and inflation. Finally, it provides analytical reasons for believing that the focus of globalization (sustained and higher world demand and strong global competitiveness) is the main cause of global disinflation. Research limitations/implications - The present study provides a starting-point for further theoretical developments within the conflict inflation approach and requires empirical testing. Originality/value - The open economy conflict inflation framework could prove to be useful in improving the understanding of the relationship between global external forces and domestic inflation.

Suggested Citation

  • Leonardo Vera, 2010. "Conflict inflation: an open economy approach," Journal of Economic Studies, Emerald Group Publishing, vol. 37(6), pages 597-615, November.
  • Handle: RePEc:eme:jespps:v:37:y:2010:i:6:p:597-615

    Download full text from publisher

    File URL:
    Download Restriction: Access to full text is restricted to subscribers

    As the access to this document is restricted, you may want to search for a different version of it.


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Marie, Jonathan, 2014. "Hyperinflation argentine de 1989 : une interprétation post-keynésienne," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 15.
    2. Eduardo F. Bastian & Mark Setterfield, 2017. "Nominal exchange rate shocks and inflation in an open economy: towards a structuralist inflation targeting agenda," Working Papers 1720, New School for Social Research, Department of Economics.
    3. Cimoli, Mario & Lima, Gilberto Tadeu & Porcile, Gabriel, 2016. "The production structure, exchange rate preferences and the short-run—Medium-run macrodynamics," Structural Change and Economic Dynamics, Elsevier, vol. 37(C), pages 13-26.


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jespps:v:37:y:2010:i:6:p:597-615. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Virginia Chapman). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.