In an article for JOTA, João Gabriel de Araújo Oliveira —who holds a PhD in economics— analyzes a paper titled “I Accuse” (“Eu acuso”) by André Lara Resende, a board member at CEBRI. The piece examines a proposal to lower Brazil’s base interest rate (the Selic), challenging the premise that high interest rates are essential for controlling inflation. Drawing on macroeconomic models and recent economic literature, the author argues that this strategy could be viable if a significant portion of the fiscal risk premium is itself a function of the interest rate.

The text notes, however, that the proposal’s effectiveness hinges on a variable that has yet to be measured: the extent to which a reduction in interest rates would impact Brazil’s risk premium. The author advocates for the Central Bank to investigate this relationship and make the findings public, thereby fostering an economic debate grounded in evidence rather than mere theoretical stances.

Read the article here