Tsunami Monetário – Ciclos Monetários Internacionais e Desafios para a Economia Brasileira

This paper analyses China's central role in determining monetary cycles across countries since the 1997 Asian financial crisis. At first, China`s accumulation strategy, based on the repression of domestic consumption demand, generated an excess supply without a compensating increase in domestic demand. The solution was found in establishing a pattern of trade deficits and surpluses between China and its partners, on the one hand, and consuming countries, especially the United States, on the other hand, resulting in an arrangement that reorganized aggregate demand and supply among countries in a mutually beneficial way. However, on the financial side, there has been a progressive mismatch of risks that eventually led to the global financial crisis of 2008. Particularly, countries with current account surpluses, through the accumulation of foreign exchange reserves by their central banks, agreed to cover the exchange rate risk, but not the credit risk being generated by consumers. This "residual" credit risk was then accumulated within the financial system, which saw dramatic growth until the crisis of 2008. With the outbreak of the crisis, this system of commercial and financial intermediation collapsed. To take its place in an attempt to generate new sources of aggregate demand, and due to political constraints to fiscal expansion, each member of the system, in its own way, replaced the pre-crisis arrangements with unconventional monetary policy measures. This led to "liquidity tsunamis" of foreign capital during the post-crisis period, particularly for emerging economies. Despite restoring the global liquidity level, these policies still did not re-established the pre-crisis levels of economic growth and exchange rates.