Abstract

This article develops the idea that the three basic theories of inflation (the monetary, the fiscal and the inertial) complement one another. This interpretation brings about two important policy issues: first, the necessity of done coordination between fiscal and monetary policy; and second, the necessity of the synchronization of antiinflationary measures on demand and cost side to break up the link between the present and past inflation due to the indexation. These question are developed in the context of Brazilian institutional homework, of multiplicity of budgets, formal indexation and a peculiar monetary system. Finally, alternative policies are critically evaluated.