Abstract
The article assesses how macroeconomic instability was amplified in the Brazilian economy during the first months of the Covid-19 pandemic by the private dynamics of financial wealth allocation. It affects the possibilities and limits of fiscal and monetary policies, in particular via effects on the exchange rate. The general reasons for financial volatility and its impacts on the management of economic policy are also discussed. The role of speculation is analyzed. In the context of low interest rates, which prevailed until 2020, and the proliferation of procyclical investment and risk management strategies by local investors, especially hedge funds – it has been a source of increased instability and volatility in prices. The text also discusses ideas for regulation to encourage the diversity of views and investment strategies, mitigating the negative externalities of speculation.
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