Currency Stabilisation under Conditions of International Capital Mobility: The Case of Brazil
This paper challenges conventional interpretations of the real plan in two different ways. First, it argues that the contractionary monetary and fiscal policies that adorned its launch were largely irrelevant. Inflation was reduced primarily by the elimination of inertia and the repression of the distributive conflict through the internationalisation and liberalisation of the economy. Second, it shows that the plan is inconsistent, because it relies heavily on permanently high domestic interest rates in order to attract foreign capital. However, they destabilise the balance of payments and worsen the fiscal deficit endogenously.
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- de Carvalho, Fernando J Cardim, 1993. "Strato-inflation and High Inflation: The Brazilian Experience," Cambridge Journal of Economics, Oxford University Press, vol. 17(1), pages 63-78, March.
- Jeffrey Sachs & Alvaro A. Zini Jr., 1996. "Brazilian Inflation and the Plano Real," The World Economy, Wiley Blackwell, vol. 19(1), pages 13-37, 01.
- Cysne, Rubens Penha & Lisbôa, Paulo César Coimbra, 2004. "Imposto Inflacionário e Transferências Inflacionárias no Mercosul e nos Estados Unidos," Economics Working Papers (Ensaios Economicos da EPGE) 572, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
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- Rudiger Dornbusch, 1997. "Brazil's Incomplete Stabilization and Reform," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(1), pages 367-404.
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