Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001
Autor(a) principal: | |
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Data de Publicação: | 2003 |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Revista de Economia Política |
Texto Completo: | http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0101-31572003000400547 |
Resumo: | ABSTRACT This paper evaluates the macroeconomic response of the Brazilian government in 2001 following the emergence of sharp negative events in both the external and internal sectors with particular focus on monetary and exchange rate policies. It points out that the kind of macroeconomic reaction depicted by the standard Mundell-Fleming model is of little practical importance in a small open economy engulfed in dollar denominated debts and experiencing a confidence crisis like Brazil’s. The Brazilian economy operates as if there were some sorts of ceilings for the exchange rate and for interest rates, in a clear departure from the assumptions embodied in the “pure” model. In this kind of environment another set of actions is required to fight a dangerous exchange rate overshooting and that is proven by the events of 2001. Whilst the actions taken by the monetary authorities proved successful at that moment the paper shows that they came with sizeable real and financial costs as collateral. Therefore, the paper argues in favour of another set of macroeconomic responses which should have been preferred if we were to avoid such costs. |
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Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001Monetary policyexchange rateovershootinginterventionABSTRACT This paper evaluates the macroeconomic response of the Brazilian government in 2001 following the emergence of sharp negative events in both the external and internal sectors with particular focus on monetary and exchange rate policies. It points out that the kind of macroeconomic reaction depicted by the standard Mundell-Fleming model is of little practical importance in a small open economy engulfed in dollar denominated debts and experiencing a confidence crisis like Brazil’s. The Brazilian economy operates as if there were some sorts of ceilings for the exchange rate and for interest rates, in a clear departure from the assumptions embodied in the “pure” model. In this kind of environment another set of actions is required to fight a dangerous exchange rate overshooting and that is proven by the events of 2001. Whilst the actions taken by the monetary authorities proved successful at that moment the paper shows that they came with sizeable real and financial costs as collateral. Therefore, the paper argues in favour of another set of macroeconomic responses which should have been preferred if we were to avoid such costs.Centro de Economia Política2003-12-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersiontext/htmlhttp://old.scielo.br/scielo.php?script=sci_arttext&pid=S0101-31572003000400547Brazilian Journal of Political Economy v.23 n.4 2003reponame:Revista de Economia Políticainstname:EDITORA 34instacron:EDITORA_3410.1590/0101-31572004-0638info:eu-repo/semantics/openAccessFARIA,LAURO VIEIRA DEeng2020-09-22T00:00:00Zoai:scielo:S0101-31572003000400547Revistahttps://centrodeeconomiapolitica.org.br/repojs/index.php/journalONGhttps://centrodeeconomiapolitica.org.br/repojs/index.php/journal/oai||cecilia.heise@bjpe.org.br1809-45380101-3157opendoar:2020-09-22T00:00Revista de Economia Política - EDITORA 34false |
dc.title.none.fl_str_mv |
Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001 |
title |
Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001 |
spellingShingle |
Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001 FARIA,LAURO VIEIRA DE Monetary policy exchange rate overshooting intervention |
title_short |
Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001 |
title_full |
Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001 |
title_fullStr |
Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001 |
title_full_unstemmed |
Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001 |
title_sort |
Financial Markets, External Shocks and Policy Responses: The Case of Brazil 2001 |
author |
FARIA,LAURO VIEIRA DE |
author_facet |
FARIA,LAURO VIEIRA DE |
author_role |
author |
dc.contributor.author.fl_str_mv |
FARIA,LAURO VIEIRA DE |
dc.subject.por.fl_str_mv |
Monetary policy exchange rate overshooting intervention |
topic |
Monetary policy exchange rate overshooting intervention |
description |
ABSTRACT This paper evaluates the macroeconomic response of the Brazilian government in 2001 following the emergence of sharp negative events in both the external and internal sectors with particular focus on monetary and exchange rate policies. It points out that the kind of macroeconomic reaction depicted by the standard Mundell-Fleming model is of little practical importance in a small open economy engulfed in dollar denominated debts and experiencing a confidence crisis like Brazil’s. The Brazilian economy operates as if there were some sorts of ceilings for the exchange rate and for interest rates, in a clear departure from the assumptions embodied in the “pure” model. In this kind of environment another set of actions is required to fight a dangerous exchange rate overshooting and that is proven by the events of 2001. Whilst the actions taken by the monetary authorities proved successful at that moment the paper shows that they came with sizeable real and financial costs as collateral. Therefore, the paper argues in favour of another set of macroeconomic responses which should have been preferred if we were to avoid such costs. |
publishDate |
2003 |
dc.date.none.fl_str_mv |
2003-12-01 |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0101-31572003000400547 |
url |
http://old.scielo.br/scielo.php?script=sci_arttext&pid=S0101-31572003000400547 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
10.1590/0101-31572004-0638 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
text/html |
dc.publisher.none.fl_str_mv |
Centro de Economia Política |
publisher.none.fl_str_mv |
Centro de Economia Política |
dc.source.none.fl_str_mv |
Brazilian Journal of Political Economy v.23 n.4 2003 reponame:Revista de Economia Política instname:EDITORA 34 instacron:EDITORA_34 |
instname_str |
EDITORA 34 |
instacron_str |
EDITORA_34 |
institution |
EDITORA_34 |
reponame_str |
Revista de Economia Política |
collection |
Revista de Economia Política |
repository.name.fl_str_mv |
Revista de Economia Política - EDITORA 34 |
repository.mail.fl_str_mv |
||cecilia.heise@bjpe.org.br |
_version_ |
1754122480013803520 |