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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