The Brazilian experience in managing interest-exchange rate nexus

Produced by: 
The Competence Center for Money, Trade, Finance and Development
Available from: 
May 2013
Paper author(s): 
Ricardo Carneiro (University of Campinas)
Pedro Rossi (University of Campinas)

This paper addresses four main questions: firstly, it discusses some theoretical background related to the interest-exchange rate nexus; secondly, it makes an attempt to explain why the interest rate in Brazil is so high, examining briefly the main explanations for it; thirdly, it describes Brazil's foreign exchange markets, their size and hierarchy; and lastly, it explains the carry trade dynamics considering the institutionalism of the Brazilian foreign exchange market and also the government policies envisioned to curb it.


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