Graphical interpretation of adjustment program costs

ABSTRACT

This work is based on a Bresser-Pereira’s paper, in which he proposes to represent the liquid costs of an economic adjustment applied upon a country. For that study he used a graphic tool. Generally speaking, we may say that there are two situations: the first one occurs when the country ‘s government decides to apply the adjustments and reforms as soon as distortions appear. The second one happens when the government, in spite of the evidences, muddling through reforms, waits for a society consensus. To illustrate this two different cases, Mexico and Argentina were chosen. Although the graphic tried to show the transitional costs of adjustment, it is possible to deduce other interesting things - basis of this work.

KEYWORDS:
Stabilization; inflation