IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/323.html
   My bibliography  Save this paper

The old and the new in heterodox stabilization programs : lessons from the 1960s and the 1980s

Author

Listed:
  • Kiguel, Miguel A.
  • Liviatan, Nissan

Abstract

The objective of this paper is to gain new insights about the strengths and weaknesses of the heterodox approach for stopping inflation based on the experience of programs implemented in some Latin American countries and Israel in the sixties and eighties. The most important income policies supported stabilization programs in recent years were those launched in Argentina in June 1985, in Israel in July 1985, in Brazil in February 1986 and most recently by Mexico in 1987 - 88. The authors point out that tight fiscal policy is critical to the success of a heterodox program, particularly during the flexibilization period in which price and wage controls are removed. In the failures of the 1960s and the 1980s, the budget situation had already deteriorated when controls were removed. A relaxed fiscal stance during the freeze led to a sharp acceleration of inflation later. Heterodox programs fail not because income policies are poorly designed but because the fiscal effort does not persist.

Suggested Citation

  • Kiguel, Miguel A. & Liviatan, Nissan, 1989. "The old and the new in heterodox stabilization programs : lessons from the 1960s and the 1980s," Policy Research Working Paper Series 323, The World Bank.
    • Handle: RePEc:wbk:wbrwps:323
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1989/12/01/000009265_3960928153525/Rendered/PDF/multi0page.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Helpman, Elhanan & Leiderman, Leonardo, 1988. "Stabilization in high inflation countries: Analytical foundations and recent experience," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 28(1), pages 9-84, January.
    2. Milton Friedman & Herbert Giersch & William Fellner, 1974. "Essays on Inflation and Indexation," Books, American Enterprise Institute, number 919189, September.
    3. Foxley, Alejandro, 1980. "Stabilization policies and stagflation: The cases of Brazil and Chile," World Development, Elsevier, vol. 8(11), pages 887-912, November.
    4. Rudiger Dornbusch & Mario Henrique Simonsen, 1987. "Inflation Stabilization with Incomes Policy Support: A Review of the Experience in Argentina, Brazil and Israel," NBER Working Papers 2153, National Bureau of Economic Research, Inc.
    5. Cukierman, Alex & Liviatan, Nissan, 1991. "Optimal accommodation by strong policymakers under incomplete information," Journal of Monetary Economics, Elsevier, vol. 27(1), pages 99-127, February.
    6. Kiguel, Miguel A., 1989. "Inflation in Argentina : stop and go since the Austral plan," Policy Research Working Paper Series 162, The World Bank.
    7. Barro, Robert J & Gordon, David B, 1983. "A Positive Theory of Monetary Policy in a Natural Rate Model," Journal of Political Economy, University of Chicago Press, vol. 91(4), pages 589-610, August.
    8. Cardoso, Eliana A & Dornbusch, Rudiger, 1987. "Brazil's Tropical Plan," American Economic Review, American Economic Association, vol. 77(2), pages 288-292, May.
    9. Malan, Pedro S. & Bonelli, Regis, 1977. "The Brazilian economy in the seventies: Old and new developments," World Development, Elsevier, vol. 5(1-2), pages 19-45.
    10. Kiguel, Miguel A & Liviatan, Nissan, 1988. "Inflationary Rigidities and Orthodox Stabilization Policies: Lessons from Latin America," The World Bank Economic Review, World Bank, vol. 2(3), pages 273-298, September.
    11. Solimano, Andres, 1989. "Inflation and the costs of stabilization : country experiences, conceptual issues, and policy lessons," Policy Research Working Paper Series 226, The World Bank.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Tornell, Aaron & Velasco, Andres, 1998. "Fiscal discipline and the choice of a nominal anchor in stabilization," Journal of International Economics, Elsevier, vol. 46(1), pages 1-30, October.
    2. Guillermo A. Calvo & Carlos A. Végh, 1994. "Inflation Stabilization And Nominal Anchors," Contemporary Economic Policy, Western Economic Association International, vol. 12(2), pages 35-45, April.
    3. RUGE-MURCIA, Francisco J., 1997. "Credibility and Signaling in Disinflation- a Cross Country Examination," Cahiers de recherche 9712, Universite de Montreal, Departement de sciences economiques.
    4. Bayir , Ilker, 2012. "Currency Reform in Turkey and Lessons from Re-Denomination and Euro Changeover," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 6(2), pages 1-33, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kiguel, Miguel A. & Liviatan, Nissan, 1991. "Lessons from the heterodox stabilization programs," Policy Research Working Paper Series 671, The World Bank.
    2. Vegh, Carlos, 1991. "Stopping High Inflation: An Analytical Overview," MPRA Paper 20175, University Library of Munich, Germany.
    3. Kiguel, Miguel & Liviatan, Nissan, 1990. "The business cycle associated with exchange-rate-based stabilization," Policy Research Working Paper Series 513, The World Bank.
    4. Kiguel, Miguel & Liviatan, Nissan, 1990. "The inflation - stabilization cycles in Argentina and Brazil," Policy Research Working Paper Series 443, The World Bank.
    5. Solimano, Andres, 1989. "Inflation and the costs of stabilization : country experiences, conceptual issues, and policy lessons," Policy Research Working Paper Series 226, The World Bank.
    6. Winkler, Bernhard, 2000. "Which kind of transparency? On the need for clarity in monetary policy-making," Working Paper Series 0026, European Central Bank.
    7. Alex Cukierman, 1998. "The Economics of Central Banking," International Economic Association Series, in: Holger C. Wolf (ed.), Contemporary Economic Issues, chapter 3, pages 37-82, Palgrave Macmillan.
    8. Helpman, Elhanan & Leiderman, Leonardo, 1990. "Real wages, monetary accommodation, and inflation," European Economic Review, Elsevier, vol. 34(5), pages 897-911, July.
    9. Persson, Torsten & Tabellini, Guido, 1999. "Political economics and macroeconomic policy," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 22, pages 1397-1482, Elsevier.
    10. repec:hal:spmain:info:hdl:2441/6982 is not listed on IDEAS
    11. Freedman, Charles, 1990. "La politique monétaire des années 90 : leçons et enjeux," L'Actualité Economique, Société Canadienne de Science Economique, vol. 66(2), pages 147-186, juin.
    12. Joshua Aizenman & Reuven Glick, 2008. "Pegged Exchange Rate Regimes—A Trap?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(4), pages 817-835, June.
    13. Elmar Mertens, 2016. "Managing Beliefs about Monetary Policy under Discretion," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 48(4), pages 661-698, June.
    14. Bodenstein, Martin & Hebden, James & Nunes, Ricardo, 2012. "Imperfect credibility and the zero lower bound," Journal of Monetary Economics, Elsevier, vol. 59(2), pages 135-149.
    15. RUGE-MURCIA, Francisco J., 1997. "Credibility and Signaling in Disinflation- a Cross Country Examination," Cahiers de recherche 9712, Universite de Montreal, Departement de sciences economiques.
    16. Winkler, Bernhard, 2000. "Which kind of transparency? On the need for clarity in monetary policy-making," Working Paper Series 26, European Central Bank.
    17. Winiecki, Jan, 1991. "The Polish transition programme at mid-1991: Stabilisation under threat," Kiel Discussion Papers 174, Kiel Institute for the World Economy (IfW Kiel).
    18. Cukierman, Alex, 2008. "Central bank independence and monetary policymaking institutions -- Past, present and future," European Journal of Political Economy, Elsevier, vol. 24(4), pages 722-736, December.
    19. Miguel A. Kiguel, 1999. "The Argentine Currency Board," CEMA Working Papers: Serie Documentos de Trabajo. 152, Universidad del CEMA.
    20. Robert G. King & Yang K. Lu & Ernesto S. Pastén, 2008. "Managing Expectations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1625-1666, December.
    21. repec:spo:wpmain:info:hdl:2441/6982 is not listed on IDEAS
    22. Norbert Funke, 1993. "Credibility of government policy: Lessons for economies in transition," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 28(2), pages 73-78, March.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:323. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Roula I. Yazigi (email available below). General contact details of provider: https://edirc.repec.org/data/dvewbus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.