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A Strategy of Development with Stability

Author

Listed:
  • Luiz Carlos Bresser-Pereira
  • Yoshiaki Nakano

Abstract

To resume economic growth after 20 years of quasi-stagnation depends on a growth strategy that combines macroeconomic stability with growth-oriented policies. The Real Plan stabilized prices, but, as a trade-off, the interest rate skyrocketed while the exchange rate remains artificially appreciated. The main challenge is to reduce the basic interest rate, which is considerably higher than the ones in countries with similar country risk classification. There are several reasons for that including little concern of the monetary authorities with reducing the interest rate, and the inverse relation between the interest rate and the default risk: the high interest rate defined by the Central Bank influences upward the Brazil risk. JEL Classification: E4; E5; O54.

Suggested Citation

  • Luiz Carlos Bresser-Pereira & Yoshiaki Nakano, 2002. "A Strategy of Development with Stability," Brazilian Journal of Political Economy, Center of Political Economy, vol. 22(3), pages 533-563.
    • Handle: RePEc:ekm:repojs:v:22:y:2002:i:3:p:533-563:id:951
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    More about this item

    Keywords

    Interest rate; exchange rate; Brazil risk; Central Bank;
    All these keywords.

    JEL classification:

    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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