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The “hot money” phenomenon in Brazil

Author

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  • Mylène Gaulard

Abstract

Because of its high interest rates, Brazil attracts more and more speculative capital flows, called “hot money”, under the form of foreign loans, direct or portfolio investments. Actually, the country is directly involved in a carry-trade strategy that tends to appreciate the real, what penalizes the Brazilian exportations of manufactured products. Moreover, capital inflows are extremely volatile, and their departure, causing a fall in loans granted to the Brazilian private banks, could provoke a dangerous burst of the speculative bubble they have contributed to form in the Brazilian real estate sector. JEL Classification: F32; E44; O54.

Suggested Citation

  • Mylène Gaulard, 2012. "The “hot money” phenomenon in Brazil," Brazilian Journal of Political Economy, Center of Political Economy, vol. 32(3), pages 367-388.
    • Handle: RePEc:ekm:repojs:v:32:y:2012:i:3:p:367-388:id:359
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    Keywords

    Brazil; carry-trade; capital inflows; speculative bubbles;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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