ABSTRACT
This chapter seeks to show that inflation target regimes-policy-based macroeconomic models do not take into account important structural characteristics of the Latin American economies. It discusses a theoretical critique of the inflation target models applied in Latin America based on the region’s economic structural characteristics. The chapter also discusses the main stylised facts in the Latin American countries that apply inflation targets, emphasising the evolution of growth, inflation, the terms of trade and income distribution. The drop in workers’ participation in national income is what generates economic stagnation. The Brazilian economy’s performance is specific and interesting because it shows that the wage policies of the early 2000s had a positive impact on functional distribution of income. Inflation was stabilised at the cost of a regressive redistribution of income. The negative effect is that changes in income distribution will be to the detriment of workers.
