Overvaluation trend of the Brazilian currency in the 2000s: empirical estimation

Abstract

been persistently overvalued throughout almost all of the period under analysis, and we suggest that the long-term reference level of the real exchange rate was reached in 2004. In July 2014, the average nominal exchange rate should have been around 2.90 Brazilian reais per dollar (against an observed nominal rate of 2.22 Brazilian reais per dollar) to achieve the 2004 real reference level (average of the year). That is, according to our estimates, in July 2014 the Brazilian real was overvalued at 30.6 per cent in real terms relative to the reference level. Based on these findings we conclude the paper suggesting a mix of policy instruments that should have been used in order to reverse the overvaluation trend of the Brazilian real exchange rate, including a target for reaching a real exchange rate in the medium and the long-run which would favor resource allocation toward more technological intensive sectors.

Financial liberalization and structural change: the Brazilian case in the 2000s

“…(8) For an estimate of the 'optimal' long-term real exchange rate in Brazil, see Nassif et al (2015a); Oreiro and Araújo (2013); Marconi (2012).…”

Taxa De Câmbio E Ajuste Externo: Uma Investigação Com Modelos Ardl Para as Economias Emergentes Do Brics

“…Existem vários estudos sobre o comportamento/trajetória da taxa de câmbio e dos regimes cambiais nos BRICS -ver Das (2019) para a China; Couto e Meurer (2017) e Nassif et al (2015) para o Brasil; Pattnaik et al (2003) para a Índia; Basher et al (2016) e Mironov e Petronevich (2015) para a Rússia; e Aron (2014) para a África do Sul. De forma mais geral os autores indicam uma preocupação de que tais economias possam vivenciar fenômenos como a Doença Holandesa e um processo de desindustrialização, especialmente nos casos de Brasil, Rússia e África do Sul, que têm alta concentração na exportação de bens primários/recursos naturais.…”

Elephant limps, but jaguar stumbles: Unpacking the divergence of state capitalism in Brazil and India through theories of capitalist diversity

“…High interest rates – implemented by the independent central bank to avoid a return to previous periods of hyperinflation – are an expression of the public bond-based financial incentive regime and have attracted massive carry trades, leading to a strong overvaluation of the Brazilian currency. Already in April 2011, the Brazilian Real was already heavily over-valued in relation to its long-time optimal value (Nassif et al., 2011). This overvaluation of the domestic currency is seen as one of the major causes of the Brazilian economic record, particularly in manufacturing (Nassif et al., 2015: 1314–1315).…”