Political conditions for successful inflation stabilization: comparing Brazil and Argentina

• Main Author: Yonca Özdemir
• Format: Article
• Language: English
• Published: Instituto Brasileiro de Relações Internacionais 2015-06-01
• Series: Revista Brasileira de Política Internacional
• Subjects: inflação crônica; programas desinflacionários; construção de coalizão política; estabilização
• Online Access: http://www.scielo.br/scielo.php?script=sci_arttext&pid=S0034-73292015000100063&lng=en&tlng=en

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.