The resumption of inflation in Brazil: 1974-1986

From 1974-1985 the Brazilian inflation rate showed a tendency to grow asopposed to the declining tendency observed in the 1964-1973 period. The causes of this resurgenceof 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 “classicalorthodox tradition” which sees inflation as being caused by excessive increases in the moneysupply; and the “neo-structuralist school for which inflation is considered basically the resultfrom the monopoly power of corporations, trade unions, and the state, culminating in theconcepts of inertial inflation. The failure of orthodox school in both its diagnosis and its inflationarycontrol policies led to author to conclude, through an analysis of the institutionalstructure of Brazil, and the conduct of its components that the neo-structuralist explanationcome 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 ofeconomic stabilization – inspired by neo-structuralist ideas, which was implemented in Brazilon February 28, 1986. JEL Classification: E31.