TIME DESCRIPTION OF ECONOMIC REFORMS

At the end of the 20th century, economic thought faced a fundamental challenge: the ineffectiveness of traditional monetarist approaches in addressing hyperinflation in several Latin American countries, including Brazil. In response, the theory of inertial inflation emerged, offering a novel paradigmatic approach that emphasized managing inflationary expectations and breaking the cycle of inflationary inertia. Despite its theoretical grounding, the practical outcomes of implementing this theory in Brazil remain a subject of scholarly debate. Consequently, there is a need for a systematic evaluation of the effectiveness of this approach to determine its actual contribution to economic stabilization and to assess its adaptability to contemporary macroeconomic conditions, which significantly differ from the realities of the 1990s. Research Objective. The study aims to analyze the foundations of the inertial inflation theory and the specifics of its practical implementation within Brazil’s stabilization programs. Research Subject. The process of implementing the inertial inflation theory in Brazil’s economic stabilization policies. Methods. The study employs a comparative-historical analysis to draw parallels between the stages of anti-inflationary strategies in Brazil and to identify causal relationships between policy decisions and their outcomes. Statistical analysis enabled the processing of empirical data arrays (inflation, interest rates, GDP). Time series analysis was used to examine inflation dynamics, while econometric modeling facilitated a quantitative assessment of the relationship between the introduction of inertial anchors, inflationary expectations, and consumer prices. Main Hypothesis. The practical implementation of the inertial inflation theory was a key factor in overcoming hyperinflation in Brazil during the 1990s. Presentation of Main Findings. The study elucidates the genesis and results of implementing the heterodox theory of inertial inflation in Brazil’s economic policy during the second half of the 20th century. It clarifies the interplay of inflationary expectations, indexation mechanisms, and structural imbalances that shaped the trajectory of the country’s macroeconomic dynamics. Unlike monetarist or Keynesian approaches, the inertial inflation theory is rooted in mechanisms of wage and price indexation, pricing models in oligopolistic markets, and inflationary expectations that can trigger a self-sustaining inflationary cycle. The study evaluates the effectiveness of key heterodox stabilization plans in Brazil (Cruzado Plan 1986, Bresser Plan 1987, and Real Plan 1994) in breaking the inertial cycle. It is demonstrated that the success of the Real Plan was driven by a strategy combining orthodox measures (exchange rate anchor, strict fiscal discipline) with heterodox tools aimed at dismantling the inertial mechanism. Originality and Practical Significance. The originality of the research lies in its comprehensive analysis of Brazil’s stabilization experience through the lens of the inertial inflation theory, with an emphasis on the interaction of psychological (expectations) and institutional factors, which are often overlooked in traditional economic studies. The practical significance is reflected in the potential application of the study’s findings to develop anti-inflationary strategies for modern economies facing high inflation. Conclusions and Future Research Directions. The practical implementation of the inertial inflation theory under the Real Plan proved to be a decisive factor in overcoming hyperinflation in Brazil. Its success stemmed from the ability to effectively break inflationary inertia by managing expectations and introducing transitional currency anchors. However, the sustainability of the achieved stabilization was conditional and depended on subsequent structural reforms and robust institutional frameworks. Future research directions include exploring inertial inflation in Brazil’s service sector in the context of prospective fiscal-monetary imbalances.

Morlin, G. S. (2025). International cost-push inflation and monetary policy in Brazil. Structural Change and Economic Dynamics, 75 (12), 486-500.

Ushenko, N., Likhonosova, G., Zahariev, A., Shaulska, L., Kęsy, M., and Hurochkina, V. (2023). Strategies for strengthening business economic security with account to global financial challenges. Financial and Credit Activity Problems of Theory and Practice, 6(53), 300–317.

Teixeira, M. (2025). Living with Inflation: Policymaking and Popular Practices in Search of Price Stability after Brazil’s Economic Miracle. Radical History Review, 2025(151), 153-187.

Giorno, J., Padovan Junior, A., and Abila Tarosso, I. (2025). How influential is monetary policy on Ibovespa returns and volatility? EconomiA, 112-129.

Blejer, M. I., Cheasty, A. (1988). High inflation, heterodox stabilization, and fiscal policy. World Development, 16(8), 867-881.

Carvalho, A. R. D. (2015). The conceptual evolution of inflation inertia in Brazil (Doctoral dissertation, Universidade de São Paulo), 162.

de Melo, F. D. A. M. (1986). IGP or IPCA as inflation estimators and indexes in the Brazilian economy. Brazilian Journal of Political Economy, 6(2), 272-284.

Bresser-Pereira, L. C. (2023). The theory of inertial inflation: a brief history. Brazilian Journal of Political Economy, 43(2), 480-498.

Novaes, A. D. (1993). Revisiting the inertial inflation hypothesis for Brazil. Journal of Development Economics, 42(1), 89-110.

Durevall, D. (1999). Inertial inflation, indexation and price stickiness: Evidence from Brazil. Journal of Development Economics, 60(2), 407-421.

Moreira, R. R., Monte, E. Z., & Abdala, A. (2018). Inflation targeting and inflation deviation inertia: a study for Brazil based on the fractional integration approach. Journal of Applied Economics, 21(1), 67-83.

Arida, P., & Resende, A. L. (1985). Inertial inflation and monetary reform in Brazil (Vol 85). Texto para discussão.

Brazilian Inflation Rates: 1981 to 2025. Historical inflation rates for Federative Republic of Brazil. Updated: July 10, 2025. Retrieved from: https://www.rateinflation.com/inflation-rate/brazil-historical-inflation-rate/ (Access date: June 20, 2025).