The Roots of Brazil’s Economic Crisis
Thank you for bringing Dornbusch to the discussion. He was an insightful economist and one that understood Brazil's economy well. He did support the Plano Real (which he called "Larida") and recommended indexation of the exchange rate (see interview Folha March 31, 1996). He also criticized what he called the "obsession" with low inflation and the consequent high real interest rate. His ideas are as valid today as they were 25 years ago. The world of finance would like us to believe that emerging economies are at the mercy of capital flows. Theory and historical experience challenge this belief. Also, the East Asia experience is a living demonstration that this is not the case.