Inflation and Consumption - Marcelo Neri

March, 1990


The book seeks to study the causes behind the consumption boom triggered by the Cruzado Plan through the construction and simulation of theoretical models. It explores the consumption and financial behavior of family units in a chronically inflationary and indexed economy. It also considers in detail some institutional features of the Brazilian economy, especially those related to the financial circulation of household units. Later based on these models we analyse the leading economic indicators during the Cruzado Plan year. The main conclusion resulting from this work is that although a significant share of demand increase can be credited to the adoption of expansionary monetary, fiscal, wage and credit policies, a substantial part of the observed expansion of the economy was due to endogenous mechanisms related to consumption and financial decisions, activated by the disinflation process itself.