TAXA DE CÂMBIO, CRESCIMENTO E ESTABILIZAÇÃO

Abstract

This paper develops a macro-economic model devoted to analyzing the influence of the exchange rate on, simultaneously, the general price level, the internal production and the external debt caused by current transactions deficits. The approach allows for the outline of an economic plan to rectify the exchange rate policy in order to restore external equilibrium. Main conclusion is that economic policy led the Real to be 37% over-valuated in 1995, ceteris paribus all other economic policy tools. Therefore, if decided not to cut importation through promoting internal recession and unemployment, it would be necessary a devaluation of around 37% in order to stop external debt growth. Considering the elasticities estimates, the corresponding trade-off would be an “once-for-all” increase of only 3% on prices, largely compensated by a 4.1% real internal production expansion. It is observed, however, that this devaluation would be “too large”, implying that the ceteris paribus condition would no longer be sustainable. The paper suggests rethinking the Brazilian economic policy as a whole, at least because an external crisis, also denominated “speculative attack”, was then inevitable.