Avoiding some costs of inflation and crawling toward hyperinflation: The case of the Brazilian domestic currency substitute

In: Journal of development economics, Band 51, Heft 1, S. 139-159

Abstract

Two elements played key roles in differentiating the Brazilian case of inflation from the classical hyperinflations: indexation and the provision of a reliable domestic currency substitute, i.e. the provision of liquidity to interest-bearing assets. This paper claims that the existence of this domestic currency substitute was the main source of both the inability of the Brazilian Central Bank to fight inflation and of the unwillingness of Brazilians to face the costs of such a fight. (DSE/DÜI)