ABSTRACT
This article develops the idea that the three basic theories of inflation (the monetary, the fiscal, and the inertial) complement one another. This interpretation brings about two important policy issues: first, the necessity of the coordination between fiscal and monetary policy; and second, the necessity of the synchronization of anti-inflationary measures on the demand and cost side to break up the link between the present and past inflation due to the indexation. These questions are developed in the context of Brazilian institutional homework, of a multiplicity of budgets, formal indexation, and a peculiar monetary system. Finally, alternative policies are critically evaluated.
KEYWORDS:
Inflation; stabilization