Stabilization policies and trade liberalization: a comparative analysis of Chile, Argentina and Mexico’s experiences
Brazilian Journal of Political Economy, Vol. 15 No. 1 (1995), Jan-Mar / 1995, Pages 41-57
This article examines Chile’s 1976-81, Argentina’s 1987-92, and Mexico’s 1982-92 stabilization experiences. In these three cases high inflation was curbed after orthodox stabilization policies with liberal structural reforms had been followed by using a fixed exchange rate as an “anchor” for the price level. It suggests the existence of a trade off between internal and external equilibria. Orthodox stabilization policies can be very successful in equilibrating the balance-of-payment without producing price level stability. In contrast, curbing high inflation may require fixing the exchange rate, which, combined with trade liberalization, may produce huge commercial deficits.
Keywords: Stabilization inflation exchange rate regime