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The Money Supply: The Evidence from the Brazilian Economy
Credit and Capital Markets – Kredit und Kapital, Vol. 7 (1974), Iss. 3 : pp. 364–378
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Antonio M. Silveira, Rio de Janeiro, Brazil
References
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Abstract
The Money Supply: The Evidence from the Brazilian Economy
The study analyses the money supply process in the Brazilian economy from 1948 to 1967. During this period the rate of increase in prices averaged thirty-one per cent per year and the money supply rose at an average annual rate of thirty-six per cent. A review of the institutional setting indicates that the monetary authorities were submissive to the Presidency of the country duting these two decades. The technical feasibility for controlling the stock of money is considered. Ninety-six per cent of the variability of the stock is explained by the monetary base and the expansion ratio is estimated at 2.35. The monetary authorities had the technical ability to control the discount mechanism and the reserve requirement changes. We conclude that, “fine tuning” apart, the authorities had the means to control the money stock. Discretionary control of the base is brought forward for consideration. The base is explained in terms of the budget, the changes in international reserves and the set of goals chosen by the monetary authorities. "The monetary authorities offset part of the effect of the deficits and the changes in reserves. Price stability and variations-in-output-growth avoidance seem to have significant effect in the base. The data show the independence of factors affecting the money demand and supply functions. The exogeneity of the base remains and the monetary authorities ability and discretion to control it is verifiable even in this extreme Brazilian case.