Politics of Price Stabilization: A Comparative Study of Argentina, Brazil, Israel, Mexico, and Turkey

Inflation was a common problem for developing countries in the 1970s and 1980s. From the beginning of the 21st century on, inflation is no longer as widespread as it used to be, but some few countries, like Turkey, continued to suffer from high inflation. Why have some developing countries become laggards in tackling the inflation problem, while most other countries stabilized their prices by 1990s? I argue that the answer can be found in socio-political factors as much as in economic factors. This dissertation strives to explain the persistence of inflation in developing countries with a socio-political approach. I suggest that persistent inflation cannot be explained solely by economic approaches. We also need to analyze the socio-political context of a country in order to understand why policymakers maintain inflationary policies and delay stabilization. This dissertation suggests that policymakers in some countries may experience greater difficulties in tackling inflation and face persistent inflation because of certain limitations, such as threats to national security, democracy, political instability, and proportional electoral system.This study compares the Turkish case with four other countries (Argentina, Brazil, Israel, and Mexico) to examine in detail whether and how social and political factors affect persistence of inflation. In addition to case studies, a statistical analysis of cross-national analysis is employed in order to get plausible explanations of persistent inflation. Many statistical analysis results support what is found in the case analyses. Findings suggest that international security concerns affect persistent inflation. High military expenses, which are necessary because of high threats to security, decrease the ability to eliminate inflation. Moreover, regime instability makes states less able to tackle the inflation problem and a consolidated democracy is the best political setting for price stabilization. Also, strong and stable governments are associated with less inflationary years. Electoral system and party system are relevant as well because they affect the strength and stability of the government. On the other hand, inequality and poverty do not seem to affect price stabilization