For a fully convertible currency

Persio Arida ()

Brazilian Journal of Political Economy, 2003, vol. 23, issue 3, 497-501

Abstract: The paper argues that the monetary reform undertaken in 1984 is to be completed by rendering the real fully convertible into other currencies. In present status quo the real is convertible under some circumstances and for some agents while Central Bank may suspend convertibility or alter its rules by administrative decree. As a consequence, there is a convertibility risk premium that leads to either higher domestic interest rates or a more depreciated domestic currency or both. The process of liberalization of capital movements should be pre-announced and implemented in steps. The regime of free convertibility is not a panacea but an important instrument in restoring credibility of the monetary standard. JEL Classification: F41.

Keywords: Convertibility; Real Plan; Law 4131 (search for similar items in EconPapers)
Date: 2003
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