10. Allied, German and Latin perspectives on inﬂation Alcino Câmara and Matias Vernengo1 INTRODUCTION Post Keynesian authors have emphasized in the last decades that the balance of payments constitutes the main constraint to growth (Davidson, 1990). In this respect, post Keynesians have refuted neoclassical views that assume a supply constrained economy, and have extended Keynes’s principle of effective demand into the long run (growth theory). Hence, growth is seen as being demand led. While these ideas are certainly important, post Keynesians have neglected, for the most part, the importance of the balance of payments constraint in explanations of the inﬂationary phenomena. High inﬂation and hyperinﬂation are not very common phenomena. In the twentieth century episodes of high inﬂation and hyperinﬂation occurred after the two World Wars, after the Latin American debt crises and after the collapse of the socialist block. In all these historical events balance of payments crises, severe depreciation and ﬁscal crises were present. Neoclassical economics always emphasized the ﬁscal component and neglected everything else. On the other hand, post Keynesians generally looked at normal times, inﬂation in developed countries, and emphasized the role of distributive conﬂict. However, German authors during the 1923 hyperinﬂation, and Latin American authors during the 1980s, have emphasized the importance of balance of payments crises. This chapter brings those ideas to the fore by discussing the contributions of the German Balance of Payments School and the Latin American neostructuralists. Three important points are...
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