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Economic growth with foreign saving?

Author

Listed:
  • Bresser-Pereira, Luiz Carlos
  • Nakano, Yoshiaki

Abstract

Highly indebted countries, particularly the Latin American ones, presented dismal economic outcomes in the 1990s, which are the consequence of the ‘growth cum foreign savings strategy’, or the Second Washington Consensus. Coupled with liberalization of international financial flows, such strategy, which did not make part of the first consensus, led the countries, in the wave of a new world wide capital flow cycle, to high current account deficits and increase in foreign debt, ignoring the solvency constraint and the debt threshold. In practical terms it involved overvalued currencies (low exchange rates) and high interest rates; in policy terms, the attempt to control de budget deficit while the current account deficit was ignored. The paradoxical consequence was the adoption by highly indebted countries of ‘exchange rate populism’, a less obvious but more dangerous form of economic populism.

Suggested Citation

  • Bresser-Pereira, Luiz Carlos & Nakano, Yoshiaki, 2002. "Economic growth with foreign saving?," Textos para discussão 118, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    • Handle: RePEc:fgv:eesptd:118
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    Cited by:

    1. Bresser-Pereira, Luiz Carlos, 2008. "National development strategy: the key growth institution," Textos para discussão 161, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    2. Luiz Carlos Bresser-Pereira & Paulo Gala, 2008. "Foreign savings, insufficiency of demand, and low growth," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 30(3), pages 315-334, April.
    3. Luiz Carlos Bresser-Pereira, 2010. "The global financial crisis and a new capitalism?," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 32(4), pages 499-534, July.
    4. Bresser-Pereira, Luiz Carlos, 2009. "From old to new developmentalism in Latin America," Textos para discussão 193, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    5. Bresser-Pereira, Luiz Carlos, 2004. "Exchange rate: fix, float, or manage it?," Textos para discussão 135, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    6. Bresser-Pereira, Luiz Carlos, 2009. "The global financial crisis and after: a new capitalism?," Textos para discussão 240, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    7. Luiz Bresser-Pereira & Paulo Gala, 2009. "Why Foreign Savings Fail to Cause Growth," International Journal of Political Economy, Taylor & Francis Journals, vol. 38(3), pages 58-76.
    8. Edwin Le Héron, 2003. "A New Consensus on Monetary Policy?," Post-Print halshs-00159854, HAL.
    9. Eric BERR, 2008. "Which development for the 21st century? Reflections on sustainable development\r\n (In French)," Cahiers du GREThA (2007-2019) 2008-04, Groupe de Recherche en Economie Théorique et Appliquée (GREThA).
    10. Nola Reinhardt, "undated". "Saving Rates in Latin American: Why Reformers Got It Wrong," Working Papers 2007-01, Smith College, Department of Economics.
    11. Benczes, István & Szabó, Krisztina, 2023. "Társadalmi törésvonalak és gazdasági (ir)racionalitások. A közgazdaságtan szerepe és helye a populizmus kutatásában [Social cleavages and economic (ir)rationalities: The role of economics in populism research]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(1), pages 23-54.
    12. François Combarnous & Eric Berr, 2004. "L'impact du consensus de Washington sur les pays en développement : une évaluation empirique," Post-Print hal-00153005, HAL.
    13. Bresser-Pereira, Luiz Carlos & Gala, Paulo, 2005. "Crítica do crescimento com poupança externa," Textos para discussão 145, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    14. Luiz Carlos Bresser-Pereira, 2017. "Why the ‘Rest’ doesn’t need foreign finance," Chapters, in: Vladimir Popov & Piotr Dutkiewicz (ed.), Mapping a New World Order, chapter 5, pages 71-90, Edward Elgar Publishing.

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