Monetary Policy in Brazil

Seminar paper from the year 2011 in the subject Economics - Case Scenarios, grade: 1.7, University of applied sciences, Munich, course: MBA, language: English, abstract: Executive Summary:

Brazil is the largest country in South America with the highest population. Since 2003, Brazil has improved its macroeconomic stability and built-up foreign re-serves. They have further reduced debt and managed to keep inflation rates under control while committing to fiscal responsibilities. Nevertheless, back in history, from the 1960s to 1990s the country was struggling with continuously high inflation rates until Fernando Henrique Cardoso, the minister of finance and later president of Brazil, introduced the ¿Plano Real¿ 1st of March 1994.

The assignment describes the financial history of Brazil between the 1960s and 2000 in brief by giving some numbers about inflation rates and highlighting po-tential reasons for the long period and high rates. The work describes further on the stabilization efforts in the 1990s in Brazil by introducing the ¿Plano Real¿, explaining the idea of introducing the Unidade Real de Valor, a parallel, virtual and relative currency to the Cruzeiro Real. In the third chapter the economical relation between money supply and inflation is explained by the quantity theory of money and an alternative to express inflation, the quantity equation, is given. The last part of the essay explains the classical dichotomy in economics in gen-eral and analyses the economical data of Brazil for the 1990s in this regards. The assignment is concluded by the ITM checklist.