High Inflation, "Heterodox" Stabilization, and Fiscal Policy
In 1985-86, Argentina, Bolivia, Brazil, and Israel introduced stabilization programs aimed at drastic and immediate reductions in inflation. Besides traditional fiscal and monetary policies, the stabilization packages included a number of quot;heterodoxquot; elements such as wage and price freezes, exchange rate pegging, and deindexation measures. This paper delineates the analytical relationship between the traditional and heterodox policies, discusses the role and impact of the heterodox policies in the programs, and examines in detail the role of traditional fiscal policy when coupled with heterodox policies and applied with the aim of moving quickly from very high to very low inflation