erve System in the United States.
In 1993, a tough, new monetary policy was implemented in Brazil ("Can Brazil..." 1994, p. 266). This policy was introduced by the federal government finance minister, however, and not by the Central Bank of Brazil. Therefore, although the new monetary policy is receiving international plaudits, the action remains the policy of an elected government as opposed to one implemented by a quasi independent central bank. As long as this situation prevails, monetary policy could at any time be forced to take a secondary role to fiscal policy.
One feature of the new monetary policy that is dramatically different from past monetary policy actions in Brazil is the application and enforcement of conservative reserve requirements for banks ("Can Brazil..." 1994, p. 266). Reserve requirements are 100 percent for both demand and time deposits. Brazil's stock of currency in circulation is far less than the level of the country's foreign reserves. As a consequence, the Central Bank of Brazil has allowed the money suppl
...