Economic Growth

Economic Growth

New Directions in Theory and Policy

Edited by Phillip Arestis, Michelle Baddeley and John S.L. McCombie

This enlightening and significant volume focuses on the nature, causes and features of economic growth across a wide range of countries and regions. Covering a variety of growth related topics – from theoretical analyses of economic growth in general to empirical analyses of growth in the OECD, transition economies and developing economies – the distinguished cast of contributors addresses some of the most important contemporary issues and developments in the field.

Chapter 17: Strategy for Economic Growth in Brazil: A Post Keynesian Approach

José L. Oreiro and Luiz-Fernando de Paula

Subjects: economics and finance, post-keynesian economics


José L. Oreiro and Luiz Fernando de Paula* 1. INTRODUCTION This chapter proposes a Keynesian strategy for economic policy that aims to achieve higher, stable and sustained economic growth in Brazil. Its main hypothesis is that the current poor growth performance of the brazilian economy is due to macroeconomic and structural constraints rather than the lack of microeconomic reforms (labour market, credit market, and so on), as liberal economists in Brazil have suggested. The chapter is divided into four main sections, besides this introduction. The second section briefly discusses the main features of a new economic strategy (based on demand-side and supply-side policies) that aims to overcome the constraints on sustained economic growth. The third section discusses the current economic constraints on sustained economic growth in Brazil. In the fourth section, a simple version of the Harrod–Domar growth model is utilized in order to obtain the potential growth rate of the brazilian economy. Finally, the fifth section presents a new economic policy model for the brazilian economy, designed to achieve its potential growth rate. This policy should include both demand-side, and supply-side policies. 2. KEYNESIAN ECONOMIC POLICIES: A BRIEF VIEW 2.1. Definition of Keynesian Economic Policy Contrary to orthodox economics, for which activist economic policies have no permanent effect on the real variables, such as employment and product, * The authors would like to thank Phillip Arestis and G.C. Harcourt for their helpful comments. Financial support of CNPq, PRONEX (FAPERJ/CNPq) and Fundação Araucária is gratefully...

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