The revenue and the inflation: an interpretation of the Brazilian case
Abstract
Available “fundamentalist” interpretations of Brazilian inflation seem unable to
explain why Brazil has such high rate of inflation with such a small public sector operational
deficit. An attempt is made to explain this paradox with the use of the concepts of potential
deficit with zero inflation and the inflationary erosion of budgeted government expenses.
The conclusion is that the resolution of the Brazilian inflationary conflict involves the transfer,
to local governments or the private sector, of a significant share of the current functions
of the federal government.
JEL Classification: E31; H30.
Keywords: Inflation public expenditure stabilization