What effects does the currency policy of Brazil have on the international trade position of the country and what do we expect to happen with the net trade between Brazil and the USA in the future?

In 2002 Goldman Sachs published a research about the possible economic superpowers in the year 2050. Goldman Sachs shortened the names of these countries to BRIC, which stands for Brazil, Russia, India and China. So Goldman Sachs claimed that Brazil will be one of the four dominant economic powers in the future and from that point on, Brazil was seen as an emerging economy. (Lawson, 2003) However, in 2008, due to complications in the housing market, a financial crisis started in America. This crisis had a direct negative impact on the complex financial products that are related to the housing market. The market for complex financial products, the interbank money market, deteriorated and the financial crisis in the USA quickly moved to the rest of the world. The interbank money market, in which banks provide each other substantial loans with short maturities (ranging from one day to two years), plays an important role in the global financial system. With the help of inter-bank loans, banks could provide themselves in their liquidity needs and they were able to invest their excess liquidity in short term, interest-bearing, investments. Central banks also operate on this market, as they use this market for conducting monetary policy purposes. Because of this, the financial crisis in the USA had a huge impact on all economies in the world. All the changes resulting from the financial crisis e.g. a change of the exchange rate(s), had a really big impact on the international trading positions of the different countries. During my previous Seminar “The Economics of Exchange Rates” of professor Viaene, we were asked to write a term paper about an exchange rate related topic. I decided to look at the exchange rate policy of Brazil and to also try to estimate the future exchange rate of Brazil. The paper created a lot of interest in the Brazilian economy and the impact that a crisis had on the trade (position) of this emerging economy. Therefore, this thesis will focus specifically on the Brazilian currency policy before the financial crisis, the changing policy responses as a result of the crisis and additionally what effects these different policies had on the international trade position of Brazil. I will also try to estimate the future net trade between Brazil and the USA, the biggest trading partner of Brazil, with the use of different modeling techniques in Eviews.