Public Finance in the Brazilian Monetary Debate (1915-1923)

Abstract

In the context of the First World War and the resumption of government note issuance in Brazil, monetary affairs took prominence in the national economic debate between 1915 and 1923, with Homero Batista and Antonio Carlos Ribeiro de Andrada as its main protagonists. This study seeks to examine, in particular, how these two figures understood the relationship between budget deficits and inflation, and what practical recommendations they advanced for monetary and fiscal policy, in order to shed light on contemporary views regarding the role of public finance in maintaining monetary stability. We conclude that, consistent with the conventional understanding of the monetary theories of the time, both treated fiscal and monetary issues as parallel domains and, in general, did not regard fiscal deficits as a direct or necessary cause of inflation. This perspective began to shift after 1918, when budget balance came to be seen as a prerequisite for the revaluation of the national currency and the restoration of its convertibility.