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Sources of inflation and the effects of balanced budgets and inflation targeting in developing economies
[The macroeconomics of low inflation]

Author

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  • Guilherme Klein Martins
  • Peter Skott

Abstract

This article presents a model in which distributional conflict and cross-sectoral interactions between demand and supply side forces determine inflation in developing countries. We show that the standard macroeconomic policy recommendations of inflation targeting and balanced budgets (i) increase volatility by amplifying external shocks and (ii) can lead to premature deindustrialization. The recent Brazilian experience is used to illustrate the argument.

Suggested Citation

  • Guilherme Klein Martins & Peter Skott, 2021. "Sources of inflation and the effects of balanced budgets and inflation targeting in developing economies [The macroeconomics of low inflation]," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 30(2), pages 409-444.
    • Handle: RePEc:oup:indcch:v:30:y:2021:i:2:p:409-444.
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    File URL: http://hdl.handle.net/10.1093/icc/dtab006
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    Citations

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    Cited by:

    1. Paul Auerbach & Peter Skott, 2021. "Visions of the future – a socialist departure from gloom?," PSL Quarterly Review, Economia civile, vol. 74(298), pages 155-177.
    2. Christian P Pinshi, 2022. "Ciblage des prévisions d'inflation : Un nouveau cadre pour la politique monétaire ?," Working Papers hal-03548273, HAL.
    3. Wildauer, Rafael & Kohler, Karsten & Aboobaker, Adam & Guschanski, Alexander, 2023. "Energy price shocks, conflict inflation, and income distribution in a three-sector model," Energy Economics, Elsevier, vol. 127(PB).
    4. Adam Aboobaker, 2022. "Macroeconomic Determinants of South Africa's Post-Apartheid Income Distribution," World Inequality Lab Working Papers halshs-03693225, HAL.
    5. Guilherme Klein Martins & Fernando Rugitsky, 2021. "The Long Expansion and the Profit Squeeze: Output and Profit Cycles in Brazil (1996–2016)," Review of Radical Political Economics, Union for Radical Political Economics, vol. 53(3), pages 373-397, September.
    6. Adam Aboobaker, 2022. "Macroeconomic Determinants of South Africa's Post-Apartheid Income Distribution," Working Papers halshs-03693225, HAL.
    7. PINSHI, Christian P., 2022. "Inflation-Forecast Targeting: A New Framework for Monetary Policy?," MPRA Paper 111709, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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