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Why does the investment rate not increase? Capital accumulation and stabilization policy in the 1990s and 2000s in Brazil

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  • Carmem Feijó
  • Marcos Tostes Lamônica
  • Julio Cesar Albuquerque Bastos

Abstract

The stabilization of inflation was conquered in the mid-1990s, but since then the Brazilian economy has not shown a stable growth trend. This article discusses how the maintenance of a high interest rate in Brazil has affected growth through its impact on investment decision. In a macroeconomic environment with a relatively high degree of uncertainty, decisions to accumulate capital rely heavily on retained earnings and are negatively affected by the persistent high level of interest rates. Our econometric exercise reveals that the interest rate is the most important variable to explain the investment rate, and that financialization negatively impacts physical capital accumulation.

Suggested Citation

  • Carmem Feijó & Marcos Tostes Lamônica & Julio Cesar Albuquerque Bastos, 2016. "Why does the investment rate not increase? Capital accumulation and stabilization policy in the 1990s and 2000s in Brazil," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(4), pages 539-561, October.
    • Handle: RePEc:mes:postke:v:39:y:2016:i:4:p:539-561
    DOI: 10.1080/01603477.2016.1148616
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    Cited by:

    1. Eduardo Mantoan & Vinícius Centeno & Carmem Feijo, 2021. "Why has the Brazilian economy stagnated in the 2010s? A Minskyan analysis of the behavior of non-financial companies in a financialized economy," Review of Evolutionary Political Economy, Springer, vol. 2(3), pages 529-550, December.
    2. Karel Brůna & Jiří Pour, 2023. "Population aging and structural over/underinvestment," Economic Change and Restructuring, Springer, vol. 56(4), pages 2339-2383, August.

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