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This paper aims at assessing the effects of real exchange rate overvaluation over the export composition for developing countries in a time span of 1970-2004. For this intent, it is estimated an exchange rate overvaluation index by using panel cointegration techniques (Dynamic Ordinary Least Squares (DOLS)). The results show that episodes of overvaluation are negative correlated with manufacturing exports share. In the long run, since such process induces the substitution of domestic for imported manufactured goods, the overvaluation of the TCR can reduce that share in emerging countries.

We estimate a VAR model of the Phillips curve with an exchange rate shock to the Brazilian economy. Several different specifications, with different time frequencies, were estimated. Overall the results were robust to these changes, and can be summed up in the following: i) the pass-through to the next month inflation is around 0.04 percentage points (p.p.) (0.48 p.p. over the annualized inflation); ii) a shock on the unemployment rate lasts for 18 months; iii) a shock on the expectations are carried to the next month inflation (0.58 p.p. over the annualized inflation); and iv) a shock on the inflation rate has no effect over the unemployment rate. That is, more inflation does not reduce unemployment.

We estimate the Phillips curve with an exchange rate shock to the Brazilian economy. Besides panel data, we estimate the Phillips curve by time series methodology, including Bayesian techniques and Smoothing Transition Regressions (STR) model. The econometric results show three important conclusions: a) we test and confirm the Blanchard and Gali (2007) restrictions over the sum of the coefficients associated with inflation; b) the coefficient associated to the expectation of inflation is greater than the coefficient associated with past inflation (which is in contrast with previous studies to the Brazilian economy); and c) in the short-run both the unemployment rate and the exchange rate shock are not important determinants of current inflation.

This paper aims to estimate the equilibrium real exchange rate for the Brazilian economy. The equilibrium exchange rate is defined as the level of exchange that guarantees that the net foreign asset position is stable over time. An econometric model is estimated using cointegration techniques. The results of the estimated model suggest that Brazilian currency was overvalued when compared to weighted basket of foreign currencies at the end of 2010. The model also suggests that the Brazilian currency is overvalued due to a predominantly transitory gain in Brazilian terms of trade. If this is correct the Brazilian currency must depreciate in the long run in order to sustain the stability of the net foreign asset position. Gonzalo e Granger (1995) methodology was used to decompose the series in transitory and permanent components.

The aim of this study is to evaluate the potential process of early deindustrialization in Brazil, or the reduction of the share of manufacturing in the added value, that occurred in a per capita income level that, according to the specialized literature, it is not justified. For this intent, we tested a model with the variables that could have lead to the reduction process of manufacturing share in the added value, which has been observed in Brazil since the 1980`s. Our major interest is to evaluate if the overvaluation of the exchange rate in Brazil could exert some influence on this process and the results apparently confirm this hypothesis.

This article analyzes the exchange rate misalignment in Brazil in the period between 1994 and the early 2008, exploring its causes and consequences. The method used was to adjust the exchange rate according to the economic fundamentals. The estimations led to an expected long-term exchange rate, and the deviations of the current exchange rate in relation to the estimations allowed the calculation of the exchange rate misalignment in Brazil. This shows that the exchange rate was overvalued along almost the entire period of study, and that it was more intense after the first quarter of 2005. The article also discusses the main causes of the exchange rate misalignment in Brazil, focusing on the recent period. In this regard, the factors that stand out are related to the inflows via capital and financial account, to the high domestic interest rate and to the administration of inflation. Finally, the article discusses the consequences of the overvalued exchange rate by the Brazilian economy, highlighting the negative effects on the industry, on the balance of current account and on the trade balance structure.

We examine the relationship between international reserves variation and the exchange rate and interest rate movements for the past years of the Brazilian economy. The empirical evidence obtained for the international reserves variation captures the distinction between the two exchange rate regimes after stabilization and that the international reserves movements has been affected by the movements of the interest rate and of the exchange rate (the observed exchange rate as a proxy of the expected exchange rate). Furthermore, the results suggest a reason for the Central Bank conservative behavior in keeping the interest rate high in order to avoid excessive movements of the international reserves.