Financialization of the exchange rate: conceptual delimitations and description of the Brazilian case

Pedro Rossi and Ana Carolina Nicacio

Chapter 3 in Central Banking, Monetary Policy, and Exchange Rates, 2026, pp 46-63 from Edward Elgar Publishing

Abstract: This chapter aims to investigate the theoretical and institutional aspects considered relevant for understanding the financialization of the exchange rate, which results in a more volatile exchange rate fluctuation pattern, more correlated with the international liquidity cycle and other financial assets. In addition to defining the concept of exchange rate financialization, three determining elements for this process are highlighted: the currency hierarchy, the international liquidity cycle, and the carry trade. Finally, the chapter describes the recent Brazilian case regarding the exchange rate policy, the process of financial opening, and the fluctuation pattern of the Brazilian real/US dollar exchange rate.

Keywords: Central Banking; Monetary Policy; Exchange Rate; Financialization; Exchange Rate Policy; Brazil (search for similar items in EconPapers)
Date: 2026
ISBN: 9781035330041
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