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Democracy, populism and hyperinflation: some evidence from Latin America

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  • Manoel Bittencourt

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Abstract

In this paper we test for the populist view of inflation in South America during the eventful period between 1970 and 2007, a period which captures the latest democratic transition in the continent, episodes of hyperinflation and finally macroeconomic stabilisation. The results—based on panel time-series data and analysis—confirm the prediction which suggests that recently elected governments coming into power after periods of political dictatorship, and which are faced with demand for redistribution, end up engaging in populist (or redistributive) policies, which tend to lead to high inflation and overall poor macroeconomic performance. All in all, we suggest that the implementation of democracy as such requires not only the “right political context”—or an appropriately constrained executive—to work well, but it also must come with certain economic institutions (central bank independence and a credible and responsible fiscal authority), institutions that were (coincidentally) absent in South America right after re-democratisation, but which would presumably raise the costs of pursuing populist policies in the first place. Copyright Springer-Verlag Berlin Heidelberg 2012

Suggested Citation

  • Manoel Bittencourt, 2012. "Democracy, populism and hyperinflation: some evidence from Latin America," Economics of Governance, Springer, vol. 13(4), pages 311-332, December.
  • Handle: RePEc:spr:ecogov:v:13:y:2012:i:4:p:311-332
    DOI: 10.1007/s10101-012-0117-7
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Manoel Bittencourt, 2013. "Democracy and Education: Evidence from the Southern African Development Community," Working Papers 201387, University of Pretoria, Department of Economics.
    2. Martin Rode & Julio Revuelta, 2015. "The Wild Bunch! An empirical note on populism and economic institutions," Economics of Governance, Springer, vol. 16(1), pages 73-96, February.
    3. Bittencourt, Manoel, 2012. "Financial development and economic growth in Latin America: Is Schumpeter right?," Journal of Policy Modeling, Elsevier, vol. 34(3), pages 341-355.
    4. Bittencourt, Manoel, 2012. "Inflation and economic growth in Latin America: Some panel time-series evidence," Economic Modelling, Elsevier, vol. 29(2), pages 333-340.
    5. Bittencourt, Manoel, 2012. "Inflación y crecimiento económico: Evidencia con datos de panel para América del Sur," Revista Estudios Económicos, Banco Central de Reserva del Perú, issue 23, pages 25-38.
    6. Manoel Bittencourt, 2011. "Is Copacabana Still the ‘Little Princess of the Sea’?," CESifo Forum, Ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 12(1), pages 11-16, March.
    7. Manoel Bittencourt, 2010. "Financial Development and Economic Growth in Latin America: Schumpeter is Right!," Working Papers 201014, University of Pretoria, Department of Economics.

    More about this item

    Keywords

    Democracy; Populism; Hyperinflation; Latin America; E31; E65; N16; O23; O54;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N16 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Latin America; Caribbean
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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