The Decline of the Exchange Rate Pass-Through in Brazil: Explaining the ‘Fear of Floating’
AbstractThis paper argues that the pass-through in Brazil has fallen compared with estimates in other studies on earlier time periods, and remains low. Whereas pass-through effects where high and close to 1 in the high-inflation period, they seem to have fallen to around 0.2 after the Real Plan stabilization, a number that is similar to the Import Substitution Industrialization (ISI) period of the 1950s and 1960s. Conventional results suggests that low and stable inflation environments lead to low levels of exchange rate pass-through and thus contribute to weakening the ‘fear of floating’ phenomenon experienced by some developing countries. In spite of lower pass-through effects the Brazilian Central Bank has maintained high interest rates in order to control the exchange rate. This paper suggests that ‘fear of inflation’ provides justification for the central bank’s persistent ‘fear of floating.’
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Bibliographic InfoPaper provided by University of Utah, Department of Economics in its series Working Paper Series, Department of Economics, University of Utah with number 2008_11.
Length: 27 pages
Date of creation: 2008
Date of revision:
Publication status: Published in International Journal of Political Economy, 37.4: 64-79.
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Pass-Through; Inflation; Brazil;
Other versions of this item:
- Carlos Eduardo Schönerwald da Silva & Matías Vernengo, 2008. "The Decline of the Exchange Rate Pass-Through in Brazil: Explaining the "Fear of Floating"," International Journal of Political Economy, M.E. Sharpe, Inc., vol. 37(4), pages 64-79, December.
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- O54 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-06-21 (All new papers)
- NEP-CBA-2008-06-21 (Central Banking)
- NEP-IFN-2008-06-21 (International Finance)
- NEP-MAC-2008-06-21 (Macroeconomics)
- NEP-MON-2008-06-21 (Monetary Economics)
- NEP-OPM-2008-06-21 (Open Economy Macroeconomic)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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