Abstract

From 1974-1985 the Brazilian inflation rate showed a tendency to grow as
opposed to the declining tendency observed in the 1964-1973 period. The causes of this resurgence
of inflation, its impact, and the policies used to control it are analysed in this work,
using two approaches which result from two different schools of thought: the “classical
orthodox tradition” which sees inflation as being caused by excessive increases in the money
supply; and the “neo-structuralist school for which inflation is considered basically the result
from the monopoly power of corporations, trade unions, and the state, culminating in the
concepts of inertial inflation. The failure of orthodox school in both its diagnosis and its inflationary
control policies led to author to conclude, through an analysis of the institutional
structure of Brazil, and the conduct of its components that the neo-structuralist explanation
come closer to the root of the problem, advocating the need to adopt “heterodox” policies. The author also presents a preliminary evaluation of the “Cruzado Plan” – the program of
economic stabilization – inspired by neo-structuralist ideas, which was implemented in Brazil
on February 28, 1986.

JEL Classification: E31.