Source: Tables I nnd lI •

.. _..

- .. _..

... ..

.. _..

..

.

--",.,

...

-15.

Tab1e

IV

Brazil - Inf1ation Taxen - 1965-1974 - Cr$ mi11ions (constant 1965-67 cruzeiros)(l)

Iperiodl

_Ml

_C

_{112 M2'}

_{M3 M3'} I

_B

I

I

I

1965 I 8,696 1,075 8,885 8,693 8,885 8,693 I 4,284

I I I

1966

I

I

1,238 747 1,331 1,401 1,352 1,422 .1 1,547 1967

I

4,805 548 5,135 3,968 5,230 4,064

I

I 1,5'7 1968 4,548 910 4,913 6,283 5.164 6.555

I I

3,152 1969 4.177 832 4,096 4,839 4,530 5,273

I

I 2.228 1970 3,500 669 3.860 4,939 4.584 5,694 I _1,447

I

1971 4,418 786 5,537 7,128. 6,407 8,035 I _2,858

I

1972 7,304 1,178 8,678 10,896 10.656 12,922

I

2,327 I

1973 10,713 1,750 10,966 14,062 13,645 16,822 I _4,655

I

1974- 6.071 769 6,688 6,995 10,874 11,032 I _3,705

~ I

• October.

(1) Levels of Table II x Ratos of Change of Table I.

Source: Tables I nnd lI •

-f f f f f'

f

f~

(

f f f " . •

f f • f f f f

f

f f f f

f'"

'1 f f f t f f

f

4 f f f f • • t *I

f

ti •

f

Tab1e V

Brazil _ Price Indexes and Konetarl Correction Coefficient - Levels an~ Rates of Change - 1965-l97~

Base: 196, _ 6?

=

100 - period averages

~ ~

I

^tJI

I . I

^Dl

I

^el

I cu . I

~ ^#ti I IGP

I

^Dl

--I'

P~iodl IG~ . ~ I PP~ ⁷⁰ ICV -GB ⁷⁰ CC I ⁷⁰

I

_-SP

J

_~ CCM .;. I (Doc.>, ~ I

. I I I I I .1 I I

1965 1966

72.3 56.8 I 71.6 53. 6

1

70.5 65.9 69.91 69.91 68. 7

1

61~6 1 &0.01 3~.5

I

99.7 37.9 101 41.11 99.6 41.3 95.5 36

·€1

^{101 47.0 19.48 -}

I

¹¹¹ ~.8

1967 128 28.~ ¹²⁸ 26.71 130 30.5 135 ~1·~1 ^{131 29.7 25.80} 32.4 1 138

I

24.3 1

1968 159 24.2 157 22.71 159 22.3 178 31 .91 162 23.7 31.6522.7 I 173 I 25.4 1 1969 192 20.8 187 19.11 194 22.0 210 18.01 200 23.5 }8.54 21.8

I

208 : 20.2 J 1970 230 19.8 223 19.31 238 22.7 245 16.71 238 19.0 45.88 19.0

I

24P.

I

19.2

I

1971 277 20.4 271.' 2i;51 286 20.2 282 15.11 288 21.0 55.15 20.2

I

²⁹⁷

I

^19:8

I

1972 324 17.0' 319 17.71 333 16.4 331 17.41 3¹fO 18.1 66.08 19.8

I

3~J

I

15.5 1 1973 373

I :~5·.1

^{:;;68 15. 4}

¹

^{375 12.6 394} 19.01 392 15.3 75.14 13.7

I

3S7

1

15.7

I

1974 480 1 28.7 475 29.1

1

479 27.7 510 29.41 - 91.14 21.3 1 514-

I

32.5- 1

I I 1 I I _ 1

- Octobcr. 1

IGP = General Price Index • PPA = Wbo1esa1e Price Index.

CV-GB= Cost-of-Living Index - Guanabara.

CC

=

Construction Cost Index.

CV-SP= Cost-of-Living Index. 2 CCM

=

Konetary Correction Coeffioie~t

IGP (Dee.)

=

General Priee Ipd~x (Decembar).

10.6 (PPA) + 0.3 (CV-GB) + 0.1 (CC).

2Based on PPA. Differenees in rates of change betveen PPA and CCM are eaused b1 1aga in ca1cu1ntion of

ceM

(a'six-month 1ag in general). In 1973 and beginning of 197~the CCM vas manipu1ated through the comoination of the PPA vith "offieia1 estimates". See the artic·· ~a in L dJ for more operationa1 details.

Source: Conjuntura Economiea, Fundação Getúlio Vargas, severa1 1ssues.

.. ..,

being ahared between issuers of high-powered money (currency plua reserves), and issuers and favored borrowera of D. A

precise division of the tax revenue between the p~blic and the privata sector \'lill not be attempted here. As an

approximation for the r.'-'vernment revenue from inflation produced by the iesue of high-powered money, .one presente in

diminished after the introduction of monetary correction(15!

Although no detailed data is presonted, it is well known

.. ..

principle of monetary correction would seem to apply n'aturally to demand deposita, with an indexation equivalent to the

payment of interest equal to the inflation rate. In that case, one would have roughly a real intereat rate differential

between other depoaita and demand depoaita, aawell aa a

"monetary correction differcntial" between D and currency.

An

expected consequence of the introduction of monetary correction for demand deposita(l?) (or at leaat

~ermiseion

for payment

• ...

• •

• •

• •

..

..

.,

• •

• • ..,

• •

• •

• _-.

.. _...

_

^{.. ~ ...}

-19.

111. CONCLUSIONS

Thie paper has analyzcd Friedman'a hypotheaee on monetary correction. He emphaeized that indexation would eaae the paine or aide effecte reducing inflation and lower th. government r.venue

fr~m inflation.Aa far ae the ai de effecte are concerned, an analysia with hia own dynamic model indicatee that indexation . could in tact end them or reduce them, even thdugh it ia far from

heing a aufficie9t condition. In the caae of the governm.~t r.venu., Fri.dIlan'a hypotheaia.ia obvioualy correct and I propoae to oarry the idea even further, with monetary correotion of demand deposita deaigned to reduce the direct inflatioD tax on caah balancea •

.. .. ..

escalator clauses in 'Private and governmental contracts" /l,p.2~ •

2 - For a historical background on indexation and escalator clauses in eacalator clauses. But that alternative ia not currently available."

/l,

p.3~. He makea the point that monetary correction increases subatantially transaction coate, but he thinka that this is the most promising expedient for "both reducing the harm done by inflation and facilitating the ending of inflation^llil,p.4!V •

4 -

See especially equations

(39), (44).

(45), (46) in ~. Notioe that P represente the general price level, I ia nominal national output (or income), and y is real national output (or income) so that I.P.y • The notation follows closely Friedman's aymbols, but 'he !!E betwaen actual and potential real output, ~log y - (log y)~ t' is called Friedman ia "permanent" income or "permanent" priie inetead of

"anticipated" income or "anticipated" price tor I and p., reapectively • 5 - This model hae been used by Friedman since his permanent income expectationa and the "rational eXpectationa model" - an ele.§~t

alternative expectational tormulati9n - are discusaed in

IQ/ •

6 -

See especially equations (}8),

(48',

(51), andd(52) in ~ •

.. .,

tax by pushing individuals and oorporations into higher income groups"

Li,

p.?IJ] •

11- See for example Friedman

ll1

for an analysis of the

revenue-maximizing rate of inflation, the revenue-revenue-maximizing rate of monetary grovth, and the velfare costs of c01lecting the inflation taXe

"ex-ante" monetary corraction for time depoaita and a "postfixed" or

"ex poat" indexation for aavinga depoai ta. See alao

f81

and

fl+J.

In this papar, I ahall not disousa the differencea, bút it must be aaid that since the beginning of this aaaay I have been writing about

"ex-poat" monetary correotion. The prefixed indexation oan only be olaaaified aa a new diatortion deaigned to avoid old diatortiona auch as usury.lavs. In many other cases in Brazil - e.g., vage and exchange ratea - indexation is alao of the ex-ante type •

15- A tax reform and an administra tive reform in 1966-67 helped to

accelerat~ the rate of grovth of revenues and decelerate the grovth of government expenditures. Purchasing-pover bonda bonds have also b.en succeaaful •

16- Even if one could iaolate the eftecta of balance-of-payments aurpluses, the domestic part of these aggregates vould alao grov at very high ratea in 1972-1973 •

17- Olearly, aa a counterpart of this nev indexation, the Monetary Authorities vould have to index banking reserves.

18- Hovever, one could argue that the banking syatem avoida the formal reatrictions of interest payments, with free banking services and greater facilities - such as more agenciea - to the1r customers aa a form of an implicit 1nterest rate •

/

., ..

..

., REFERENCES

.,

., C1J

Friedman, M. ItMonetary Correction", in Essays on Inflation ., . and Indexation, American Enterprise Institute, Washington, ., D.C., October 1974 •

.,

.,

^~2J Friedman, M. A Theoretica1 Framework for Monetary Ana1ysis,

~ Occasiona1 Paper 112, National Bureau of Economic Reeearch, .. Co1umbia University Press, New York, 1971 •

., .- .,

..

-.. "

.. ..

..

.. ..

.. ...

.,

"

.,

~3J Friedman, M. "Government Revenue trom Inf1at~on", Journa1 of Po1itical Economy, July-August 1971. pp. 846-856 •

~4J Giersch, H., Friedman, M., Kafka, A. et al. Essays on Inf1ation and Indexation, American Enterpri~e Inetitut~, Washington, D.C., October 1974.

Cs-l

Goldberg, S. p'~fference Eauatione, Jonh Wiley and Sons, New York, 1958 •

~6-l Lem~ruber, A.C. A Study of the Accelerationist Theorz of Inflation, Ph. D. diesertation, Dept. Economics, University of Virginia, 1974.

~7-1·Theil, H. PrinciR1es of Econometrics, Jonh Wiley and Sons, New York, 1971 •

1:8-1

Conjuntura Economica, May 1974 and December 1974, "Corre910 Monetaria", Instituto Brasileiro de Economia Funda9~0 Getulio

...

Vargas, Rio de Janeiro •

.. .. .. _{., i}

EPGE - Seminário de Pesquisa Econômioa - 10/4/15

.. ..

"An Analysie of Friedman's aypotàeses

..

on MonetaryCorreotion", APENDICE

..

Antonio C. Lemgruber

.. ..

"Tratamento de Choque"a Algumas S18ulágÕes para 1916-1919 (Caso I)

'"

.. ..

Anos Inf1B.(}ão. Desaoele-

_/J

Expansão

=

^0,1 Renda. Crescimento Hiato

.. .. .. .. _..

1915 ^{1916 1977 19,0 28,0 10,8} rB.(}&O -5,0 ^-9,0

^{-8,2 ...}

^Monet. 30,0 ^{1,0 1,0 Nomina.l. 18,2 11,5} 35,0 ^{Produto ~,8} 7,0 ^{0,7 14,1} 0,0 ^7,8

1918 4,4 -6,4 7,0 8,8 4,4 16,7

.,

^{1919 -0,2 -4,6 7,0 1,7 1,9 15,7}

M;dia

..

^{16-19' 8,5 -7,0 7,0 11,6 3,1 13,6}

..

^{Longo ,}

•

^{Prazo I 0,0 0,0 1,0 7,0 7,0 .0,0}

.. -, ^{f; =}

^0,5

..

^{Anos Infla9ão Desacele-}

...

^{Expansão Renda.} C~esoimento B1a.to

.,

r8.9&O Monet. Nominal Produto

.. _...

¹⁹⁷⁵ ₁₉₁₆ ^28,0 _{17,1 -10,9} ^{-5,0 30,0} _1,0 ^35,0 _18,2 ^7,0 _1,1 ^0,0 _5.9

1971 .6,8 -10,3 1,0 11,5 4,7 8,3

..

^{1978 -0,2} - 7,0 7,0 8,8 9,0 6,2

..,

_{1919 -3,8 - 3,6 7,0 7.7 11,5 1,7}

.. ..

^{Média 76-791} Longo ^{5,0 - 8,0 7,0 11,6 6,6 5,5}

..

^{Prazo, 0,0 0,0 7,0 7,0 7,0 0,0}

• _.,

~ =

^0,9

.. .. ..

Anos ₁₉₇₅ Infl8.9ão 28,0 Desacele-- 5,0 ^rQ9ao

^-

Expansão ^Monet. .30,0 ^Nominal Renda 35,0 Cresoimento ^Produto 7,0 Hiato 0,0

.. .. ..

^{1976 1977 1978 13,2 3,6 0,4 -14,8 - 9,6 - 3,2 7,0 7,0 7,0 11,5 18,2 8,8 5,0 7,9 8,4 -0,2 1,2 2,0}

-..

¹⁹⁷⁹ _Média. ^{-0,1 - 0,5 7,0 7,7 7,8 -1,0}

...

_{76-19' 4,3} . - 1,0 1,0 11,6 1,3 0,5

....

Longo

'"

^{Prazo. 0,0 0,0 1,0 1,0 1,0 0,0}

'" ...

~

"

^,

.. .,

..

EPOE - Seminário de Pesquisa Econômioa - 10/4/15

., .,

"An Analysis of Fr1edman' 8 HypotheBeB

..

on Monetar.y Correction", APENDlCE

..

Antonio C. Lemçuber

.. .,

"Tratamento de Choque" I Algumas Simulac;õea para 1976-1919 (Caso II)

.. _{.-., p =}

.. .,

^{Anos Intlac;ão Deaaoele-}rB9ao

...

^Expansão _Monet. 0,1 _:Nominal ^Renda Cresoimento _Produto Hiato

.. _.,

^{1915 28,0 -5,0 30,0 35,0 1,0 0,0}

1916 19,5 -8,5 1,0 7,0 -12,5 19,5

.. ...

¹⁹¹¹ 1918 ₁₉₁₉ ^12,2 1,1 _3,1 ^-1,3 -5,0 _-3,4 ^1,0 7,0 _1',0 1,0 ^1,0 _7;0 - 0,1 ^{- 5,2} _3,3

^31,7

_42,5 38,8

.,

_Média

.,

16-19& 10,6 -6,1 1,0 7,0 - 3,6 33.1

.,

^Longo

Prazo I 0,0 0,0 1,0 1,0 7.0 0,0

.. - _..

_Anos Int1&.9

ão

^Desa.oe1e-

^~

^Expansão

⁼

^0,5 Renda Cresoimento Hiato

.. .,

r&c}80

_-

Monet. :Nominal Produto

..

^{1975 1976 28,0 15,0 -13,0 -5,0 30,0 7,0 35,0 1,0 -8,0 7,0 15,0 0,0}

.. _...

^{1911 3,8 -11,2 1,0 7,0 3,2}

^18,8

1918 -2,8 - 6,6 7,0 1,0 9,8

15,9

...

¹⁹¹⁹ _Média ^{-5,4 - 2,6 7,0 1,0 12,4}

^10,6

.,

16-191 2,6 - 8,4 7,0 7,0 4,4 15,1

.. _.,

^{Longo .}

Prazo: 0,0 0,0 7,0 1,0 7,0 0,0

- _.. f3 =

^0,9

.,

_{Anos Inflação Desace1e- Expansão Renda} Crescimento Hiato

.. _..

^raçao

-

^{Monet. :Nominal Produto}

1975 28,0 - 5,0 36,0 35,0 7,0 0,0

.,

1976 5,1 -22,9 1,0 7,0 1,9

5,1

.,

^{1911 -3,0 - 8,1 7,0 1,0 10,0 2,1}

1978 .2,1 + 0,9 7,0 1,0 9,1 0,1

.. .. _,..

^{Média 1979}

^-0,4

^{+ 1,1 7,0 7,0 7,4 -0,4}

76-79 -0,1 -·7,1 7,0 7,0 7,1 1,7

-.

^Longo _{Prazo I 0,0 0,0' 7,0 7,0 7,0 0,0}

....

....

...

-.. -..

•

on Monetary Correction", APENDlOE Antonio C. Lemgruber

,.-"§i.;:,,.$.,.,,~0'~

..

~-IIIJ!_n ...

tJIIIII.d_""";"',

--"""!"""'''!''', ,.H - - - . , , - . -.. ...,., ... , , -... - - - - . . .,.., - - - -... _~. '''''''~'''''_PI

.. _..

.. ... _..

.. _.,

,

\

.. ff.i

!rcf

., .,.

.. ..

.. .. ..

.. .. _..

... .,

., ., ..

.. _..

., ..

.. ..

'IV

l,V\

t: \i~

Ctfo'~

ESCOLA DE POS-GRADUAÇAO EM ECONOMIA

No documento FUNDAÇÃO GETULIO VARGAS. Escola de pós-graduação em Economia Instituto Brasileiro de Economia. Seminário de Pesquisa Econômica - 1Sr .. '"'.. (páginas 35-46)