Abstract
In an open economy, the short-term stability of domestic prices and that of the external accounts are closely related. Chilean inflation goes back a long way. Traditionally, before the beginning of the import substitution period, during the expansive phase of the economic cycle (which largely depended on external determinants), the amount of money in circulation tended to increase sharply together with, and as a result of, export booms. By contrast, during the recessive part of the cycle, a strong interventionist state coupled with an inadequate tax structure forced successive governments to print money when exports were not doing well in international markets. As the economy became more and more isolated from world markets this latter aspect became increasingly important (Davis, 1963). However, rates of inflation tended to be moderate rather than spectacular, and the economic authorities were not unduly worried about them. In fact, a moderate rate of inflation tax was possibly welcome by most governments, regardless of their ideological persuasion (Méndez, 1970).
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
Author information
Authors and Affiliations
Copyright information
© 1993 David E. Hojman
About this chapter
Cite this chapter
Hojman, D.E. (1993). Inflation and the Trade Balance. In: Chile. Palgrave Macmillan, London. https://doi.org/10.1057/9780230376656_11
Download citation
DOI: https://doi.org/10.1057/9780230376656_11
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-39015-1
Online ISBN: 978-0-230-37665-6
eBook Packages: Palgrave Political & Intern. Studies CollectionPolitical Science and International Studies (R0)