The trasition from fixed to floating exchange rate regimes: the case of Brazil

This dissertation evaluates macroeconomic management in Brazil from 1994 to the present, with particular focus on exchange rate policy. It points out that while Brazil's Real Plan succeeded in halting the hyperinflation that had reached more than 2000 percent in 1993, it also caused significant real appreciation of the exchange rate situation that was only made worse by the extremely high interest rates and ensuing bout of severe financial crises in the intemational arena. By the end of 1998, the accumulation of internai and externai imbalances led the authorities to drop foreign exchange controls and allow the currency to float. In spite of some initial scepticism, the flexible rate regime cum inflation target proved to work well. Inflation was kept under control; the current account position improved significantly, real interest rates fell and GDP growth resumed. Thus, while great challenges still lie ahead, the recent successes bestow some optimism on the well functioning of this exchange rate regime. The Brazilian case suggests that successful transition from one foreign exchange system to another, particularly during financial crisis, does not depend only on one variable be it fiscal or monetary. In reality, it depends on whole set of co-ordinated policies aimed at resuming price stability with as little exchange rate and output volatility as possible.

Educa����o e investimentos externos como determinantes do crescimento a longo prazo

Esse artigo usa uma metodologia de decomposi����o tend��ncia-ciclo para estimar o produto potencial brasileiro e investigar a import��ncia relativa dos choques permanentes e transit��rios. Conclui-se que os primeiros explicam quase que 100% da vari��ncia do produto privado. A partir desta evid��ncia, investiga-se a exist��ncia de rela����es de longo prazo entre o produto potencial e diversos possiveis determinantes do crescimento a longo prazo, como investimentos externos, escolaridade m��dia e taxa de analfabetismo da popula����o econolT��camente ativa. Conclui-se que as duas primeiras possuem uma rela����o de longo prazo com o produto potencial, e que a elasticidade de longo prazo �� n��o desprez��vel. A luz desta evid��ncia, discute-se quest��es de política econ��mica.

Din��mica n��o-linear e sustentabilidade da d��vida p��blica brasileira

This paper contributes to the debate on whether the Brazilian public debt is sustainable or not in the long run by considering threshold effects on the Brazilian Budget Deficit. Using data from 1947 to 1999 and a threshold autoregressive model, we find evidence of delays in fiscal stabilization. As suggested in Alesina (1991), delayed stabilizations reflect the existence of political constraints blocking deficit cuts, which are relaxed only when the budget deficit reaches a sufficiently high level, deemed to be unsustainable. In particular, our results suggest that, in the absence of seignorage, only when the increase in the budget deficit reaches 1.74% of the GDP will fiscal authorities intervene to reduce the deficit. If seignorage is allowed, the threshold increases to 2.2%, suggesting that seignorage makes government more tolerant to fiscal imbalances.

Effects of the real plan of the Brazilian banking system

The aim of this paper is to assess the progress of the banking sector before and shortly after the Real Plan. We began by assessing the drop in the inflation revenues (negative real interest rates paid by the excess of demand deposits over total reserve requirements) as a result of the change in inflation from 40% a month for the pre-Real Plan period to a monthly average of 3.65% (IGP-DI), between July 1994 and May 1995. Then, using the financial statement data of a group of 90 banks, we attempt to estimate the net losses due to the inflation drop analyzing the profitability and other parameters of the banking industry. The calculations are made separately for private, state and federal banks. A later analysis on performance using information given to CVM (Securities Exchange Commission) by the six major private banks in the country is also discussed herein.

Moeda indexada

Este texto se divide em duas partes. Na primeira, estuda-se empiricamente a queda na demanda por moeda ocorrida entre 1979 e 1983, salientando-se o papel desempenhado neste processo pelo surgimento de inova����es financeiras e aumento de liquidez de ativos (ditos) n��o monet��rios. Neste ponto destaca-se a relativa inefic��cia de um combate a infla����o,baseado exclusivamente no controle da expans��o de M1 . Em seguida, desenvolve-se um modelo que tenta captar os efeitos sobre a infla����o o n��vel de atividade econ��mica, decorrentes da utiliza����o, por parte dos agentes econ��micos, de ativos indexados como reserva de liquidez alternativa a M1 . Conclui-se que o aumento de liquidez de ativos considerados n��o monet��rios protege o produto dos choques de oferta, conferindo-lhe uma maior estabilidade a ser paga pela exposi����o da infla����o aos choques de oferta e demanda.

After structuralism, a development alternative for Latin America

The paper, first, summarizes Latin American structuralism, and offers reasons why it was so influential and durable in the region, as it attended to real demands, and was part of 1950s���mainstream economics. Second, says why, with 1980s���Great Crisis, structuralism eventually ended itself into crisis, as it was unable to keep pace with historical new facts, particularly with the industrial revolution or takeoff, that made Latin American economies intermediary, still developing, but fully capitalist. Third, it lists the consensus that today exists on economic development. Forth, opposes ���official orthodoxy��� to ���developmental populism���, the former deriving from neoclassical economics, the later from structuralism, and offers, in relation to six strategic issues, a progressive development alternative.