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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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  • A. Saad-Filho, 1998. "Currency Stabilisation under Conditions of International Capital Mobility: The Case of Brazil," CIBS Research Papers in International Business 13-98, London South Bank University CIBS.
  • Handle: RePEc:sbu:cibswp:13-98

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    References listed on IDEAS

    1. Bacha, Edmar, 1997. "Plano Real: uma segunda avaliação," Coediciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1541, September.
    2. Kane, Cheikh & Morisett, Jacques, 1993. "Who would vote for inflation in Brazil? : an integrated framework approach to inflation and income distribution," Policy Research Working Paper Series 1183, The World Bank.
    3. Cysne, Rubens Penha & Lisbôa, Paulo César Coimbra, 2004. "Imposto Inflacionário e Transferências Inflacionárias no Mercosul e nos Estados Unidos," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 572, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    4. Batista Junior, Paulo Nogueira, 1996. "Plano Real: estabilização monetária e desequilíbrio externo," Textos para discussão 50, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    5. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
    6. Carmem Aparecida Feijo & Fernando J. Cardim De Carvalho, 1992. "The Resilience of High Inflation: Recent Brazilian Failures with Stabilization Policies," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 15(1), pages 109-124, September.
    7. Cardoso, Eliana A & Dornbusch, Rudiger, 1987. "Brazil's Tropical Plan," American Economic Review, American Economic Association, vol. 77(2), pages 288-292, May.
    8. 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.
    9. 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.
    10. Cysne, Rubens Penha, 1993. "Imposto inflacionário e transferências inflacionárias no Brasil," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 219, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    11. Jeffrey Sachs & Alvaro A. Zini Jr., 1996. "Brazilian Inflation and the Plano Real," The World Economy, Wiley Blackwell, vol. 19(1), pages 13-37, January.
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