Exchange rate regulation, the behavior of exchange rates, and macroeconomic stability in Brazil
AUTOR(ES)
Souza, Francisco Eduardo Pires de, Carvalho, Fernando J. Cardim de
FONTE
Brazilian Journal of Political Economy
DATA DE PUBLICAÇÃO
2011-12
RESUMO
In the last two decades an entirely new set of rules governing the foreign exchange transactions was established in Brazil, substituting for the framework inherited from the 1930s. Foreign exchange controls were dismantled and a floating exchange rate regime replaced different forms of peg. In this paper we argue that although successful by comparison to previous experiences, the current arrangement has important flaws that should be addressed. We discuss how it first led to high volatility and extremely high interest rates, which, when overcome, gave way to a long lasting appreciation of the real exchange rate with adverse consequences to industry.
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