Since the implementation of the Real Plan of 1994, the Brazilian economy has been in the process of reducing its degree of indexation. For more than three decades, Brazilian wages, rents, financial securities, and other contracts were indexed to the price level. The frequency of adjustment sometimes reached monthly or even daily intervals, as in the case of some financial securities. Brazilian indexation was inseparably associated with high rates of inflation, which averaged 20 percent per month over the last three decades. Inflation peaked at 82 percent per month during the hyperinflation (or megainflation) episode that occurred just before the Collor Plan went into effect. The association between inflation and indexation has always provoked the debate about whether high and variable inflation induces the indexation of the economy through the breakdown of nominal contracts or whether indexation perpetuates the inflationary process as argued by the inertial theory of inflation.
Attribution-NonCommercial-NoDerivs 3.0 Chile
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