Richard Rytenband
Volume 1, Issue 1
Published: Octomber 10, 2025
This paper introduces the Brazilian Currency Convertibility Risk Indicator (IRCB - Indicador de Risco de Conversibilidade Brasileiro), a novel composite index designed to assess and predict the likelihood of capital control implementation in Brazil. The IRCB aggregates five critical dimensions: fiscal situation (25%), external accounts (30%), exchange rate pressures (25%), regulatory environment (10%), and market indicators (10%). Using a comprehensive dataset spanning January 2015 to June 2025, we validate the indicator's effectiveness in capturing convertibility risk dynamics during significant economic events, including the COVID-19 pandemic, political transitions, and external shocks. The indicator successfully identified critical risk periods, with values exceeding 70 points preceding the implementation of major capital control measures. Our findings suggest that the IRCB provides policymakers and market participants with a robust early warning system for convertibility risks, achieving an accuracy rate of 87.3% in predicting control implementations within a 30-day window when the indicator exceeds the critical threshold. The framework's real-time monitoring capabilities, implemented via a RESTful API, enable continuous risk assessment, contributing to more informed decisionmaking in emerging market currency management.
Richard Rytenband, Economist PUC-SP, Investment and Quantitative Methods Specialist FGV-SP, Brazil.
Rytenband, R. (2025). Development and Validation of a Currency Convertibility Risk Indicator for Brazil: The IRCB Framework. Econ Dev Glob Mark, 1(1), 01-18.