tal was one reason Mexico found in could not pay its bills in 1982. All the while, Mexico refused to let the peso float. The overvalued peso caused more problems because foreign entities with claims on Mexico demanded payment in dollars.
Brazil reacted with a development economics-based growth program, accompanied by protective tariffs. Almost everything in the Brazilian economy was indexed to the rate of inflation. One result was that the internal economic remained relatively stable for a while. Brazil, however, attempted to maintain some of the value of its currency in international trade, with the result that the country was required to spend its hard currency reserves to support imports. In turn, BrazilÆs external debt soared. Brazil threatened to default on its external debt rather than impose the somewhat draconian orthodox austerity measures being demanded by the World Bank and the International Monetary Fund.
Argentina attempted an orthodox approach to economic management, raised interest rates to attract capital, but then lost the advantage when the Mexican debt crisis scared foreign investors away from all Latin American economies. Argentina attempted to maintain a high than supportable value for its currency to support higher interest rates. The higher currency exchange rate, however, caused exports to fall, foreign reserves to fall and foreign debt to increase.
Each of the three countries had some degree of early success with their various policy prescriptions. None, however, had log-term success with the policies. Of the three, Brazil probably fared the best.
We have seen that after many orthodox attempts to solve the inflation problem, a heterodox strategy was adopted in some Latin American countries. Explain the differences between orthodoxy and heterodoxy relative to the causes of inflation i.e., their different hypotheses and their arguments. Why should heterodoxy be better than orthodoxy to figh...