The structuralist explanation in the theory of inflation

Abstract

This paper argues that three main elements form the basis of both the Latin American and the European branches of the structuralist school of inflation theory. These elements are: (1) relative prices that change when economic structure changes; (2) downward inflexibility of (some) money prices; and (3) a passive money supply closing the deflationary gap caused by price increases. The only difference between the two branches is what they consider to be the main cause of structural change. The object of this paper is to show that models worked out by Latin American structuralists during the 1960s and models developed recently by European structuralists have a common reduced form and describe similar inflationary processes.