Abstract

This paper discusses why inflation is so high in Latin America and· what can be
done to stop it. The first part starts with an analysis of monetarism. It also discusses seignorage
models, the impact of the debt crisis and of dollarization on inflation. Next, we review
structuralism and its most recent insight: inflation inertia. Then we integrate the different
interpretations of inflation. The second part examines stabilization programs, beginning
with the analysis of programs derived from the monetarist diagnosis, or orthodox programs.
Next, we turn to heterodox programs, including both populist programs and programs
based on a new interpretation of inflation. The stabilization programs of the 1980s failed
to obtain budget consolidation and large budget deficits have pushed the economy into a
classic inflationary finance situation.

JEL Classification: E31.