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Inflation, structural change and conflict in post-disinflation Brazil: a structuralist appraisal

  • André Roncaglia de Carvalho

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    The paper analyzes some of the structural causes of inflationary persistence in Brazil in the post-Real plan period, in contrast to the Brazilian Central Bank’s view on the causes of inflation, particularly in what concerns its inertial component. It begins with a historical perspective on the convergence of stabilization theory to the so-called “macroeconomic consensus” and the understanding of inflation by this approach. We make the case that inflation can be better understood in its root causes only if the terms of distributional conflict and inter-sectoral dynamics are considered, which include the structural changes undergone by the Brazilian economy after the Real plan. Two primary pressures are therefore analyzed, namely: (i) the increase in the tertiary sector´s share of total value added in aggregate output combined with (ii) an intensive policy of income distribution. The interplay of supply and demand forces in a widely-indexed economic environment paints a more detailed picture of the current challenges faced by the ongoing monetary policy regime in Brazil than the one found in new Keynesian models.

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    File URL: http://www.fea.usp.br/feaecon/RePEc/documentos/AndreRoncagliaCarvalho25WP.pdf
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    Paper provided by University of São Paulo (FEA-USP) in its series Working Papers, Department of Economics with number 2013_25.

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    Date of creation: 20 Dec 2013
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    Handle: RePEc:spa:wpaper:2013wpecon25
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    1. Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
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    3. M. Woodford., 2010. "Convergence in Macroeconomics: Elements of the New Synthesis," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 10.
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    5. Afonso S Bevilaqua & Mário Mesquita & André Minella, 2008. "Brazil: taming inflation expectations," BIS Papers chapters, in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 139-158 Bank for International Settlements.
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    7. Campêlo, Ana Katarina & Cribari-Neto, Francisco, 2003. "Inflation Inertia and Inliers: The Case of Brazil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 57(4), October.
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    12. John McCombie & Maureen Pike, 2013. "N o End to the Consensus in Macroeconomic Theory? A Methodological Inquiry," American Journal of Economics and Sociology, Wiley Blackwell, vol. 72(2), pages 497-528, 04.
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    16. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
    17. Alex Segura-Ubiergo, 2012. "The Puzzle of Brazil's High Interest Rates," IMF Working Papers 12/62, International Monetary Fund.
    18. Dante Aldrighi & Renato P. Colistete, 2013. "Industrial Growth and Structural Change: Brazil in a Long-Run Perspective," Working Papers, Department of Economics 2013_10, University of São Paulo (FEA-USP).
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