UBR

Unlike other central banks around the world such as the U.S. Federal Reserve, Brazil's Central Bank has just one responsibility: to keep inflation low.Credit lines and other forms of borrowing, such as debt issuing, are fundamental for a country's economic growth as they allocate capital to expanding companies.In Brazil, inflation is measured by the IPCA (National Consumer Price Index), which grew to 2.44% for the trailing twelve months.

Countries around the world have responded to the economic downturn by implementing fiscal stimulus.This intervention has led to a deterioration of fiscal finances everywhere.However, even by these relative standards, Brazil and South Africa look particularly dismal.

In this article I will walk you through the commonly used but wrong way to think about volatility decay.We'll then walk through an example of volatility decay with realistic numbers.Afterwards, we'll build a simple mathematical model to calculate volatility decay from first principles.We'll compare the model with back-test simulations done on portfoliovisualizer.com.

The coronavirus impact looks to be ebbing, and the Brazilian government has been generous with demand-side stimulus measures.Manufacturing PMI, retail sales, loan growth, and services sector have also seen sequential improvements.Longer-term, commodity-rich EMs such as Brazil should benefit from the surge in liquidity.

The “middle income trap” may well characterize the experience of Brazil and most of Latin America since the 1980s.Conversely, South Korea maintained its pace of evolution, reaching a high-income status.Such divergence of economic growth can be related to their distinctive performances of domestic accumulation of technological and organizational capabilities.Their different approaches to global value chains and tradeglobalization reinforced such discrepancy in domestic accumulation processes.

Despite the growing number of COVID-19 cases, the Brazilian economy is recently showing more signs of recovery.Throughout the industry, practically all its sectors have reached values comparable to the pre-crisis level, although, in the future, their growth may slow down.After the end of coronavirus infection, we expect a more dynamic rebound in the sector of services and essential goods.Despite the vulnerable position of SMEs, the fall in the real may lead to higher prices for imports, and as a result, will support local production.