Brazilian case , Real Plan, economy
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. [...]
[...] fully discretionary policy: without any explicit anchor, but due to the timing of instability, it was necessary a more transparent policy and more "rigid" possible, involving commitment of monetary authorities. Inflation Targeting: transparent and involving commitment of the monetary authorities, very important fact to season. Thus, exchange rate anchors were replaced by a flexible exchange rate regime and the country has adopted a floating exchange rate inflação.A goals became the balance of payments adjustment instrument while the interest rate started to be used as a tool for achieving the inflation target. The attempt to maintain the monetary stabilization. [...]
[...] Implementing Inflation Targeting in Brazil. Central Bank of Brazil p. (Working paper). Fischer, Stanley, Central-Bank Independence Revisited, How Independent shouldnt the central bank be NBER, V.85 No May 1995. Mendonca, HF, Inflation Targeting: a preliminary analysis for the Brazilian case. Applied Economics. V No p.129- Rigolon, GIAMBIAGI, F. Central Bank Interventions in a stabilized economy: it is desirable to adopt inflation targeting in Brazil BNDES Essays, Essay April 1998. SICSÚ, J., control inflation Non-Monetary Policy: A Post Keynesian proposal. [...]
[...] This is a problem of politics inflation targeting. Another problem is given as to the fiscal dominance context in which it is impractical independence when using, even indirectly, monetary policy, in particular the interest rate, to finance public sector deficits. Besides having problems with the increase in debt securities and as to the possible use to finance deficits, the policy of inflation targeting has an intrinsic flaw, namely the index chosen for its measurement, the IPCA, which in addition to market prices incorporates the administered prices of consumer basket. [...]
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