The Brazilian Real Exchange Rate during the Covid-19 Pandemic

Jaqueline Terra Marins, Marta Baltar Areosa and José Valentim Machado Vicente

Revista Brasileira de Economia - RBE, 2025, vol. 79, issue 3

Abstract: The Covid-19 pandemic period was unprecedented. In this paper, we analyze the behavior of the Brazilian real exchange rate during that period. To this end, we estimate an equilibrium path of the real exchange rate using an Error Correction Model. First, we verify whether movements on the exchange rate can be explained by fundamentals or they constitute a misalignment. According to our results, the real exchange rate was in line with its determinants during the pandemic, despite its strong depreciation. Second, we find the Balassa-Samuelson effect was the main driver of the exchange rate depreciation. However, the impact of the terms of trade was in the opposite direction of the Balassa-Samuelson effect, which pre[1]vented a greater exchange rate depreciation.

Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:79:y:2025:i:3:a:92610

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