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A Critical Evaluation of the Proposal for Currency Convertibility of the Real

Author

Listed:
  • Fernando Ferrari Filho
  • Frederico G. Jayme Jr.
  • Gilberto Tadeu Lima
  • José Luís Oreiro
  • Luiz Fernando de Paula

Abstract

This paper aims at discussing critically Persio Arida’s proposal of adopting currency convertibility in Brazil. Arida (2003a, 2003b, 2004) points out that currency convertibility would make for lower domestic interest rates in Brazil, as well as for lower interest rates for the Brazilian external bonds. Besides, currency convertibility would stabilize capital flows, as well as exchange rate volatility in Brazil. We argue in this paper that this proposal does not lead necessarily either to less exchange rate volatility, or to lower interest rates. Besides, we close the paper by presenting some alternatives in terms of capital controls in Brazil. JEL Classification: E0; E6; F4.

Suggested Citation

  • Fernando Ferrari Filho & Frederico G. Jayme Jr. & Gilberto Tadeu Lima & José Luís Oreiro & Luiz Fernando de Paula, 2005. "A Critical Evaluation of the Proposal for Currency Convertibility of the Real," Brazilian Journal of Political Economy, Center of Political Economy, vol. 25(1), pages 154-173.
    • Handle: RePEc:ekm:repojs:v:25:y:2005:i:1:p:154-173:id:627
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    More about this item

    Keywords

    Financial liberalization; capital account convertibility; Brazilian economy;
    All these keywords.

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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