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Critical analysis for the Brazilian case

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Young W.
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case study
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  1. Introduction
  2. The Real Plan
  3. Monetary stabilization theory
  4. The scheme
  5. Conclusion

The Brazil felt a huge change in the economy after the Real Plan in 1994. The plan has changed the economic environment in Brazil to check the stability of the economy after a long period of high inflation. From this year on, we used two types of monetary policy: a fixed exchange rate until 1999, and the regime of inflation targets after 1999.

The Real Plan was successful without doubt as to its main objective, stabilization; however caused several economic problems remain without being resolved, particularly for the permanent fiscal imbalance. Besides the presence of several international crises (Mexican crisis, 1994/95, Asian, 1997; Russian, 1998), which affected the international liquidity, Brazil also suffered a high increase in public sector debt.

[...] Rio de Janeiro, RJ: [s.n.], [ca.200]. 25p. SICSÚ, J., Theory and Evidence of the inflation targeting regime, Political Economy Journal, V No p.23-33, January-March 2002. SILVA, Marcelo E. A PORTUGAL, Marcelo S. [...]


[...] "The scheme targets a highly indebted economy, like Brazil, can have perverse effects. A rise in interest rates may cause devaluation, derived from the increase in negative expectations of the agents on the public debt dynamics. This movement raises inflation, requiring even greater interest and further increasing public debt "(Amaral, 2004). "The policy adopted under the aegis of targeting regime was characterized by passivity in relation to market rumors and interests of the market and the interests of private capital. [...]


[...] Critical analysis for the Brazilian case The Brazil felt a huge change in the economy after the Real Plan in 1994. The plan has changed the economic environment in Brazil to check the stability of the economy after a long period of high inflation. From this year on, we used two types of monetary policy: a fixed exchange rate until 1999, and the regime of inflation targets after 1999. The Real Plan was successful without doubt as to its main objective, stabilization; however caused several economic problems remain without being resolved, particularly for the permanent fiscal imbalance. [...]

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