Exchange rate management: the case of Brazil
DOI:
https://doi.org/10.11606/1980-53572941ljfcKeywords:
exchange rates, probit models, BrazilAbstract
The paper develops an exchange rate regime choice problem in a general asset-pricing
set-up. The government has been considered the main optimising agent in the model
whereby regime switches may occur because the government can exercise discretion in
exchange rate management. Empirical estimates for the case of Brazil suggest that regime
switches are determined by the behaviour of wages and inflation. Overall, the results
suggest that price fundamentals have a more significant impact on the exchange rate in
the short run. It is not until the long run that domestic expenditure variables play a part in
exchange rate determination.
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Copyright (c) 1999 Luiz R. de Mello Jr., Francisco Galrão Carneiro
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Atualizado em 14/08/2025