A INCONSISTÊNCIA DO PLANO REAL NO LONGO PRAZO

Abstract

This paper shows that the Real Plan may face serious problems in the long run. A stylized macroeconomic model, which embodies the main characteristics of the Plan, is built to demonstrate that although the government seems to be capable of keeping inflation down, the economy converges-to a steady state equilibrium with unemployment. The assumption made to reach that conclusion is that economic agents form their expec tations based on a modified Cagan's model. In this model, ex- pectations change not only as a function of current and expected inflation, but also according to expected deficits.