The monetary policy during the Cruzado Plan

Pedro Bodin de Moraes ()

Brazilian Journal of Political Economy, 1990, vol. 10, issue 2, 176-194

Abstract: This article analyses monetary policy during the Cruzado Plan. It is argued thatthe establishment of the overnight interest rate at very low level (around 15%/year) was oneof the main factors behind the quick appearance of excess of demand in almost all markets.This excessively slacken monetary policy was the result of the government’s decision oftransforming indexated public bonds into bonds with a fixed value, assuming that future inflationwould be zero. The monetary policy of the Cruzado Plan is compared to the policiesadopted in Argentina in the first months of the Austral plan, and in Israel from July 1985on. This comparison reveals that in both cases the process of remonetization of the economywas done much more gradually than in Brazil, and that in both countries there was not excessdemand in the initial phase of the price freeze. JEL Classification: E31; E52

Keywords: stabilization; price freezing; inflation (search for similar items in EconPapers)
Date: 1990
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