Money, Banks and Finance in Economic Thought

The structuralist theory of inflation, an analysis rooted in the socioeconomic reality of Latin America

Calcagno Adriana, Université Paris 1

This paper will analyse the genesis of the structuralist theory of inflation as elaborated by some key economists at the Economic Commission for Latin America and the Caribbean (ECLAC) in the 1950s. It will show how this theory illustrates the structuralist methodology and assess to what extent it provided an alternative framework to rival theories such as the monetarist theory of inflation. The argument will be organised in two parts. The first will analyse some writings on inflation by Aníbal Pinto Santa Cruz, Juan Noyola Vázquez, Osvaldo Sunkel and Raúl Prebisch. The second part will compare the methodology, results and policy implications of the structuralist and the monetarist theories on inflation. We will evaluate whether the first provided an alternative theoretical framework within the larger structuralist perspective of ECLAC. Pinto was the first among these authors to analyse inflation with a structuralist perspective in 1947, before the ECLAC was created, and continued developing his analysis during the 1950s. Noyola then proposed in 1956 a comparative analysis of inflation, which was the first explicit formulation of the structuralist theory of inflation. In 1958, Sunkel readapted Noyola's theory, and his version became the most known internationally. Finally, Prebisch extracted policy recommendations which were consistent with the structural reform programmes supported by ECLAC. The originality of the structuralist theory of inflation relied mostly on its methodology. In contrast with the rival monetarist theory, ECLAC authors did not explain inflation in different countries and circumstances with the same single factor (excessive monetary creation), but rather considered a plurality of causes, rooted in the real economy as well as in specific social and institutional structures. Some of these factors generated “basic inflationary pressures”, while others favoured inflation propagation and/or amplification. As a result, the analysis did not confine inflation as a solely monetary phenomenon, although its "symptoms" were monetary, which is why Noyola bluntly stated that "inflation is not a monetary phenomenon. It is the result of real disequilibria that manifest in the form of an increase in the level of prices". These economists proposed an original view on inflation, which was a good example of ECLAC's structuralist thinking.

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Keywords: inflation, structuralism, ECLAC

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