Currency hierarchy, inflation targeting and structural change: the Brazilian experience

Daniela Magalhães Prates, Carolina Baltar and Rosângela Ballini

Chapter 13 in The Future of Central Banking, 2022, pp 290-315 from Edward Elgar Publishing

Abstract: The aim of this chapter is to analyze how the exchange rate dynamics has affected the manufacturing production and jeopardized structural change in Brazil since the adoption of the Inflation Targeting Regime (ITR) in 1999. The analysis shows that the very subordinated position of the Brazilian real in the currency hierarchy results in a cyclical and volatile behavior of the exchange rate under the ITR that has an asymmetrical impact on the manufacturing production in the appreciation and depreciation phases over capital flows cycles. Our results indicate that investment occurs when domestic currency appreciates, but only reinforces the existing productive structure, and imports increase. On the other hand, when the national currency depreciates, the positive effect on manufacturing production is not enough to boost manufacturing growth for two reasons. First, this depreciation reflects an unfavorable international scenario. Second, the deindustrialization process in force since the 1990s that was fostered by the long-lasting appreciation phase under the ITR between 2003 and the outbreak of the global financial crisis of 2008-2009.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/view/edcoll/9781839100932/9781839100932.00026.xml (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:19461_13

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().