A gloomy look at Brazil’s economic woes and the state’s increasingly ineffective economic policy instruments:
“Faced with (two) poisonous options, a middle path is most likely. Interest rates will be too high for households and firms, so subsidised funding will grow. But they will be too low to protect the real, so swap costs will rise, too. Both subsidies put extra pressure on the government’s finances. By mixing monetary and fiscal policy in this way, Brazil is slowly rendering both ineffective.”
IR Theory & Practice 