Inflationary acceleration, financial instability and internal and external indebtedness

Alexandre Schwartsman ()

Brazilian Journal of Political Economy, 1992, vol. 12, issue 4, 480-490

Abstract: IWe provide here a model that attempts to explain how the financial circuit inBrazil became an outstanding locus of wealth valuation. It shows that its special characteris due to a peculiar institutional arrangement that allows the public sector – the main financialagent – to operate with negative spread. Then, inflationary shocks can produce verystrong movements of private sector portfolio, between indexed and non-indexed bonds,which can deepen the negative spread. This is the reason why the financial circuit is a sourceof wealth valuation, since this negative spread is appropriated by the financial speculators. JEL Classification: H63.

Keywords: Public debt; credit; inflation (search for similar items in EconPapers)
Date: 1992
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