Inflationary Rigidities and Orthodox Stabilization Policies: Lessons from Latin America (original) (raw)

Inflation stabilization in chronic inflation countries: The empirical evidence

1994

There is a rich history of stabilizations in chronic inflation countries, which spans more than three decades. This provides a unique opportunity to identify the main patterns of adjustment and examine econometrically some of the main features of disinflation in chronic inflation countries. Our study is based on 17 stabilization plans from 1964 to the present in 7 countries: Argentina, Brazil, the Dominican Republic, Israel, Mexico, Peru, and Uruguay. Twelve of these programs were based on the use of the exchange rate as the nominal ...

Fighting Inflation in Argentina: A brief history of ten stabilization plans

This paper seeks to identify what worked and what didn’t work to stop inflation in Argentina in the last seventy years. The approach is descriptive rather than theoretical and examines the relative performance of the only ten stabilization plans that, during the period 1952-2015, lasted at least 24 months. The paper also compares the performance of these plans along other dimensions, such as economic growth, unemployment and income distribution and evaluates the impact of international economic conditions. The analysis sheds light on the debates shock vs. gradualism and orthodox vs. heterodox and puts the current stabilization plan in a historical context.

Reducing Inflation through Inflation Targeting: The Mexican Experience1

La serie de Documentos de Investigación del Banco de México divulga resultados preliminares de trabajos de investigación económica realizados en el Banco de México con la finalidad de propiciar el intercambio y debate de ideas. El contenido de los Documentos de Investigación, así como las conclusiones que de ellos se derivan, son responsabilidad exclusiva de los autores y no reflejan necesariamente las del Banco de México.

Inflation Targeting in Latin America

SSRN Electronic Journal, 2000

This paper analyzes Latin America's recent experience with the use of inflation targeting (IT) while the region has made substantial progress toward eradicating high inflation. The paper assesses the implementation and results of inflation targeting in Latin America from a broad perspective. It starts by reviewing the issues relevant for the choice of exchange-rate regimes and monetary frameworks, documenting the evolution of exchange rate and monetary regimes in Latin America during the last two decades. Then it describes the Latin American and world samples of inflation targeters and compares their performance to non-targeters, focusing on their success in meeting inflation targets, their output sacrifice in achieving low inflation, and their output volatility. A more detailed analysis of five IT experiences follows for Brazil, Chile, Colombia, Mexico, and Peru, with reference to the design of IT in the world sample of inflation targeters. The paper concludes by focusing on the dynamics of inflation reduction in the longest IT experience in the region (the case of Chile), evaluating how IT has affected inflation expectations and hence the effectiveness of monetary policy, using a battery of alternative model estimations and simulations.

Political conditions for successful inflation stabilization: comparing Brazil and Argentina

This study tries to understand how Brazil and Argentina, two countries with chronically high inflation, achieved permanent stabilization by looking at political factors necessary for stabilization. It suggests that, although state autonomy or political unity may contribute to successful price stabilization, reconciling the interests of different stakeholders and thereby building a broad political support base is more essential for stabilization to succeed. Political skills of the leaders and compensatory policies may help raise such support and they are more crucial where other political conditions are less favorable. Also, rapid improvement in the economy is important for sustained political support, and thus, for successful stabilization.

The inflation - stabilization cycles in Argentina and Brazil

The Austral plan in Argentina and the Cruzado plan in Brazil were major stabilization attempts with lasting effects on the inflation process in both countries. The purpose of this paper is to understand the reasons that led to the large instability in inflation in both countries, and to explain why neither country succeeded in sustaining a high, but stable rate of inflation. This instability was not accompanied by a noticeable increase in the average rate of inflation. In Argentina inflation was in fact lower on average during the first three years after the Austral plan than in the previous three years, while in Brazil the increase in the average rate of inflation after the Cruzado plan was not dramatic. The paper presents the view that the type of instability that emerged following the failure of the heterodox shocks was a consequence of the large reliance on income policies for stopping inflation in the Austral and Cruzado plans and in the follow-up programs. It was the repeated ...