Financialised internationalisation and structural hierarchies: a mixed-method study of exchange rate determination in emerging economies

This paper conducts an extensive mixed-method study of exchange rate determination in the Brazilian foreign exchange market. It combines semi-structured interviews with foreign exchange market participants in Brazil and London and advanced time-series econometrics. In line with Post Keynesian theory and critical realist ontology, the interviews uncover the context-specific expectations and underlying processes and structures that condition exchange rate dynamics in Brazil and emerging economies more generally. The results point to important structural changes in Brazil’s financial integration in the form of currency internationalisation and financialisation. Moreover, they show that this internationalisation has been mediated through a structured and hierarchic international monetary system which fundamentally distinguishes exchange rate drivers in emerging economies from those in developed ones.