The paper revisits Keynes, Meade, and Kahn on the tension between internal and external balance, shows how the Mundell–Fleming model and the monetary-policy trilemma narrowed the debate, and then sketches a post-Keynesian framework that brings the BoP back as a central constraint.

Our takeaway: given the inflationary and distributional consequences of sharp depreciations, it may be prudent for the Brazilian CB to fear “too much floating” and use its available tools promptly to prevent excessive pressure on the domestic currency and intervene to stabilize it when necessary

Stability returned after the CB intervened in FX markets and hiked interest rates. Brazil’s fiscal position remained unchanged and a successful T-bond auction in external markets, suggests foreign investors weren’t worried about fiscal risks

Capital outflows via crypto & digital transactions further weakened the FX through September. By the end of 2024, an additional and faster depreciation hit triggered by seasonal factors, external turbulence, and the lack of FX intervention by the CBk. Resident capital outflows played a key role

Despite a widening current account deficit, driven by higher imports due to growth and investment, Brazil’s external liquidity and solvency remained solid in 2024. Yet, a falling base rate, despite a high Fed funds rate, discouraged portfolio inflows