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Economic growth with foreign saving?

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  • Pereira, Luiz C. Bresser
  • 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

  • Pereira, Luiz C. Bresser & Nakano, Yoshiaki, 2002. "Economic growth with foreign saving?," Textos para discussão 118, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  • Handle: RePEc:fgv:eesptd:118
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    References listed on IDEAS

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    Cited by:

    1. Pereira, Luiz C. Bresser, 2008. "National development strategy: the key growth institution," Textos para discussão 161, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (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. Pereira, Luiz C. Bresser, 2009. "From old to new developmentalism in Latin America," Textos para discussão 193, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    5. Pereira, Luiz C. Bresser, 2004. "Exchange rate: fix, float, or manage it?," Textos para discussão 135, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    6. Eric Berr & François Combarnous, 2004. "L'impact du consensus de Washington sur les pays en développement : une évaluation empirique," Documents de travail 100, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
    7. Pereira, Luiz C. Bresser, 2009. "The global financial crisis and after: a new capitalism?," Textos para discussão 240, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    8. 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.
    9. Eric BERR (GREThA), 2008. "Which development for the 21st century? Reflections on sustainable development\r\n (In French)," Cahiers du GREThA 2008-04, Groupe de Recherche en Economie Théorique et Appliquée.
    10. Pereira, Luiz C. Bresser & Gala, Paulo, 2005. "Crítica do crescimento com poupança externa," Textos para discussão 145, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
    11. Pereira, Luiz C. Bresser, 2016. "Why the ‘Rest’ doesn’t need foreign finance," Textos para discussão 415, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).

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