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Canaries and Vultures: A Quantitative History of Monetary Mismanagement in Brazil

  • Pedro H. Albuquerque

    (Texas A&M International University)

  • Solange Gouvea

    (Central Bank of Brazil)

During the last two decades of the twentieth century, Brazil went through a sequence of failed stabilization plans that tried to cope with an enduring hyperinflation. This paper uses a money demand model to evaluate monetary policies during those episodes. The consistency between the money supply and the expected conditional money demand growth rates is considered for each plan. It is shown that the unsuccessful programs were marked by excessive liquidity. The results not only suggest that the mismanagement of the monetary aggregates led to the failure of the plans, but also that the excessive liquidity could have been predicted.

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Paper provided by EconWPA in its series Development and Comp Systems with number 0511027.

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Length: 34 pages
Date of creation: 23 Nov 2005
Date of revision:
Handle: RePEc:wpa:wuwpdc:0511027
Note: Type of Document - pdf; pages: 34
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  6. Mishkin, Frederic S. & Savastano, Miguel A., 2001. "Monetary policy strategies for Latin America," Policy Research Working Paper Series 2685, The World Bank.
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  8. Garcia, Marcio G. P., 1996. "Avoiding some costs of inflation and crawling toward hyperinflation: The case of the Brazilian domestic currency substitute," Journal of Development Economics, Elsevier, vol. 51(1), pages 139-159, October.
  9. G. William Schwert, 1988. "Tests For Unit Roots: A Monte Carlo Investigation," NBER Technical Working Papers 0073, National Bureau of Economic Research, Inc.
  10. Eliana A. Cardoso & Rudiger Dornbusch, 1987. "Brazil's Tropical Plan," NBER Working Papers 2142, National Bureau of Economic Research, Inc.
  11. Cheung, Yin-Wong & Lai, Kon S, 1993. "Finite-Sample Sizes of Johansen's Likelihood Ration Tests for Conintegration," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 313-28, August.
  12. 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.
  13. Anindya Banerjee & Robin L. Lumsdaine & James H. Stock, 1990. "Recursive and Sequential Tests of the Unit Root and Trend Break Hypothesis: Theory and International Evidence," NBER Working Papers 3510, National Bureau of Economic Research, Inc.
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  15. James G. MacKinnon, 1990. "Critical Values for Cointegration Tests," Working Papers 1227, Queen's University, Department of Economics.
  16. Frederic S Mishkin & Miguel A Savastano, 2002. "Monetary Policy Strategies For Emerging Market Countries: Lessons From Latin America," Comparative Economic Studies, Palgrave Macmillan, vol. 44(2-3), pages 45-82, September.
  17. Pierre-Richard Agénor & Mark P. Taylor, 1991. "Testing for Credibility Effects," IMF Working Papers 91/110, International Monetary Fund.
  18. 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.
  19. Joel Bogdanski & Alexandre Antonio Tombini & Sérgio Ribeiro da Costa Werlang, 2000. "Implementing Inflation Targeting in Brazil," Working Papers Series 1, Central Bank of Brazil, Research Department.
  20. Tanner, Evan, 1994. "Balancing the budget with implicit domestic default: The case of Brazil in the 1980s," World Development, Elsevier, vol. 22(1), pages 85-98, January.
  21. Amann, Edmund & Baer, Werner, 2003. "Anchors Away: The Cost and Benefits of Brazil's Devaluation," World Development, Elsevier, vol. 31(6), pages 1033-1046, June.
  22. Barbosa, Fernando de Holanda & Brandão, Antônio Salazar Pessôa & Faro, Clovis de, 1988. "O reino mágico do choque heterodoxo," Economics Working Papers (Ensaios Economicos da EPGE) 125, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
  23. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
  24. Silva, Maria Luiza Falcão & de Andrade, Joaquim Pionto, 1996. "Brazil's new currency: origin, development and perspectives of the Real," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 50(4), October.
  25. Cardoso, Eliana A., 1991. "Deficit finance and monetary dynamics in Brazil and Mexico," Journal of Development Economics, Elsevier, vol. 37(1-2), pages 173-197, November.
  26. Vito Tanzi, 1977. "Inflation, Lags in Collection, and the Real Value of Tax Revenue (L'inflation, les retards de recouvrement et la valeur réelle des recettes fiscales) (Inflación, desfases en la recaudación y valor ," IMF Staff Papers, Palgrave Macmillan, vol. 24(1), pages 154-167, March.
  27. Merette, Marcel, 2000. "Post-Mortem of a Stabilization Plan: The Collor Plan in Brazil," Journal of Policy Modeling, Elsevier, vol. 22(4), pages 417-452, July.
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