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Economic growth with foreign saving?

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  • 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. "The new developmentalism and conventional orthodoxy," Textos para discussão 156, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    2. 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).
    3. Luiz Carlos Bresser-Pereira & Fernando Rugitsky, 2018. "Industrial policy and exchange rate scepticism [Open economy models of distribution and growth]," Cambridge Journal of Economics, Oxford University Press, vol. 42(3), pages 617-632.
    4. 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.
    5. 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.
    6. 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).
    7. Edwin Le Heron, 2003. "A new consensus on monetary policy?," Brazilian Journal of Political Economy, Center of Political Economy, vol. 23(4), pages 505-530.
    8. 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).
    9. François Combarnous & Eric Berr, 2004. "L'impact du consensus de Washington sur les pays en développement : une évaluation empirique," Post-Print hal-00153005, HAL.
    10. 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).
    11. Bresser-Pereira, Luiz Carlos & Feijó, Carmem & Araújo, Eliane Cristina, 2022. "The determination of the exchange rate: a new-developmental approach," Textos para discussão 558, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    12. Andrés Rius & Carolina Román, 2018. "Countries in the hamster wheel?: Nurkse-Duesenberry demonstration effects and the determinants of savings," Documentos de Trabajo (working papers) 18-11, Instituto de Economia - IECON.
    13. 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.
    14. Bresser-Pereira, Luiz Carlos, 2017. "The economics and the political economy of new-developmentalism," Textos para discussão 464, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    15. Bresser-Pereira, Luiz Carlos & Feijó, Carmem & Araújo, Eliane Cristina de, 2021. "Do liberal policy regimes condemn Latin America to quasi-stagnation?," Textos para discussão 541, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).
    16. 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).
    17. Andrés Rius & Carolina Román, 2021. "Countries in the hamster’s wheel?: Nurkse- Duesenberry demonstration effects and the determinants of saving," Revista Cuadernos de Economía, Universidad Nacional de Colombia -FCE - CID, vol. 40(82), pages 193-225, February.
    18. Bresser-Pereira, Luiz Carlos, 2010. "The global financial crisis, neoclassical economics, and the neoliberal years of capitalism," Revue de la Régulation - Capitalisme, institutions, pouvoirs, Association Recherche et Régulation, vol. 7.
    19. 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).
    20. Bresser-Pereira, Luiz Carlos, 2016. "Why the ‘Rest’ doesn’t need foreign finance," Textos para discussão 415, FGV EESP - Escola de Economia de São Paulo, Fundação Getulio Vargas (Brazil).

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    More about this item

    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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