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Guilherme Klein Martins, Peter Skott, Sources of inflation and the effects of balanced budgets and inflation targeting in developing economies, Industrial and Corporate Change, Volume 30, Issue 2, April 2021, Pages 409–444, https://doi.org/10.1093/icc/dtab006
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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.
© The Author(s) 2021. Published by Oxford University Press on behalf of Associazione ICC. All rights reserved.
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