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The Brazilian economy pulled by the aggregate demand

Author

Listed:
  • José Luís Oreiro
  • Luciano Nakabashi
  • Gustavo José de Guimarães e Souza

Abstract

This article aims to present the demand-led growth theory and some empirical evidences for a demand-led growth regime in Brazil. First of all, we will do a brief review of the theory of demand led-growth, based in the seminal work of Kaldor (1988), for whom long-run growth is determined by the growth rate of consumption expenditures and the growth rate of exports. Based in the empirical methodology developed by Atesoglu (2002), we run some econometric tests for the hypothesis of demand-led growth for Brazilian economy. The results of such tests shown that near of 85% of GDP growth in Brazil in the period 1991-2005 is explained by variables at the demand side of the economy. Besides that, based in the methodology developed by Ledesma and Thirwall (2002), we shown that natural rate of growth for Brazilian economy is endogenous, increasing during boom times. This means that appears to be no restrictions in the supply side of the economy for a faster growth of Brazilian economy. Finally, we argue that a necessary condition for a sustained growth of Brazilian economy is the adoption of a export-led growth model. For such it is necessary to put an end on the actual over-valuation of real exchange rate. JEL Classification: O11; O47; O54.

Suggested Citation

  • José Luís Oreiro & Luciano Nakabashi & Gustavo José de Guimarães e Souza, 2010. "The Brazilian economy pulled by the aggregate demand," Brazilian Journal of Political Economy, Center of Political Economy, vol. 30(4), pages 581-603.
    • Handle: RePEc:ekm:repojs:v:30:y:2010:i:4:p:581-603:id:460
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    More about this item

    Keywords

    economic growth; aggregate demand; real exchange rate;
    All these keywords.

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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