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Three Papers on Brazilian Trade and Payments

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  • Eliana A. Cardoso
  • Rudiger Dornbusch

Abstract

This report brings together three separate, short papers on problems of Brazilian trade and payments. The following topics are addressed: the determinants of export behavior in the manufactures sector, measures of the real exchange rate and the monetary approach applied to the external balance. In the paper on export behavior of manufactures, we report estimates of an export supply equation. We show that for the period 1959-1977 exports of manufactures were determined by productive capacity, the relative price (inclusive of subsidies) facing exporters and the domestic output gap. The equation describes well the behavior of exports and documents on export price elasticity of unity and a significant responsiveness of exports to the level of domestic demand relative to capacity. The study of real exchange rates examines a number of different empirical measures of external competitiveness. Specifically, we look at the manufactures terms of trade, the relative wholesale prices in Brazil and abroad, export prices relative to home prices and export prices relative to prices in world trade. The comparison of these real exchange rate measures points out the important role that composition effects played in Brazilian export growth. A large fraction of Brazilian exports is in the area of processed foods that experienced a particularly sharp increase in their relative price in world trade in 1968-1974. The paper dealing with the monetary approach explains reserve and exchange rate behavior in terms of domestic credit and the determinants of nominal money demand. It corrects earlier estimates in the literature and, while sustaining the success of a monetary approach, it also qualifies that approach by drawing attention to the role of monetary liabilities of the consolidated banking, system.

Suggested Citation

  • Eliana A. Cardoso & Rudiger Dornbusch, 1980. "Three Papers on Brazilian Trade and Payments," NBER Working Papers 0541, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:0541
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    References listed on IDEAS

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    1. Wilford, D Sykes & Wilford, Walton T, 1978. "On the Monetary Approach to the Balance of Payments: The Small, Open Economy," Journal of Finance, American Finance Association, vol. 33(1), pages 319-323, March.
    2. Girton, Lance & Roper, Don, 1977. "A Monetary Model of Exchange Market Pressure Applied to the Postwar Canadian Experience," American Economic Review, American Economic Association, vol. 67(4), pages 537-548, September.
    3. Connolly, Michael & Dantas da Silveira, Jose, 1979. "Exchange Market Pressure in Postwar Brazil: An Application of the Girton-Roper Monetary Model," American Economic Review, American Economic Association, vol. 69(3), pages 448-454, June.
    4. S. J. Prais, 1961. "Some Mathematical Notes on the Quantity Theory of Money in an Open Economy," IMF Staff Papers, Palgrave Macmillan, vol. 8(2), pages 212-226, May.
    5. Sargen, Nicholas P, 1977. "Exchange Rate Flexibility and Demand for Money," Journal of Finance, American Finance Association, vol. 32(2), pages 531-544, May.
    6. Magee, Stephen P, 1976. "The Empirical Evidence on the Monetary Approach to the Balance of Payments and Exchange Rates," American Economic Review, American Economic Association, vol. 66(2), pages 163-170, May.
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    Cited by:

    1. Robert E. Cumby & Maurice Obstfeld, 1983. "Capital Mobility and the Scope for Sterilization: Mexico in the 1970s," NBER Chapters, in: Financial Policies and the World Capital Market: The Problem of Latin American Countries, pages 245-276, National Bureau of Economic Research, Inc.
    2. Elio Londero, 2001. "The alleged countercyclical nature of Argentina's exports of manufactures," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 10(2), pages 151-173.

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