The Dynamics of Inflation

Originally published in Latin America where it was enthusiastically received, The Dynamics of Inflation presents the first detailed, theoretical schema for the study of accelerating inflation in chronically inflated economies with complex productive structures. Antonio Kandir demonstrates that because of adjustment, these economies tend to move toward a situation where inflation begins to acquire an endogenous acceleration component that raises serious problems for all kinds of stabilization policies. Kandir begins by establishing criteria for classifying theories of inflation and defines the theoretical perspective on which this book is based. He argues that integration between the macroeconomic and microeconomic levels is needed to understand the dynamics of prices under conditions of high instability. He develops an overall framework to study the short-run dynamics of desired markups and demonstrates that expectations about the future prices of public-fiscal goods and exchange goods assume importance in determining desired markups. Kandir concludes that these attempts at adjustment lead to pressures for changes in relative prices between sectors with different patterns of use of these goods; and that in turn leads to an accelerating inflation that is sustained for as long as the adjustment is considered complete. With the aid of sophisticated models, Kandir shows the limits and problems of the stabilization policies that have been implemented to reduce inflation or contain its acceleration when there is an endogenous component of acceleration. This book, which analyzes the nature and development of democracy in Uruguay, will appeal to a variety of scholars, especially Latin Americanists and scholars working on parties, elections, and democracy.