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Competitiveness and convergence in Portugal

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  • Jorge Braga de Macedo

    (Faculdadde de Economia da Universidade Nova de Lisboa e Instituto de Investigação Científica Tropical)

Abstract

The complementary package of macroeconomic and structural policies associated with Portugal joining the European Monetary System in 1992 failed because budgetary control was inconsistent with the new currency regime. In its three sections, this paper focuses on the consequences for growth of this enduring policy failure. Its two main reasons were excessive primary expenditure and state-led wage inflation. Reform procrastination and the reversion of a purely demand-led boom is the main lesson from Portugal on what can be called competitiveness for convergence. Reforms are more likely to fall prey to the second-best argument under ready-made policy packages with scant knowledge about local conditions. A more systemic approach to national economies will include the concept of complementarity as an input into economic advice, as shown in connection with transition by Macedo and Martins (forthcoming).

Suggested Citation

  • Jorge Braga de Macedo, 2007. "Competitiveness and convergence in Portugal," GEE Papers 0004, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Nov 2007.
  • Handle: RePEc:mde:wpaper:0004
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    File URL: http://www.gee.gov.pt/RePEc/WorkingPapers/jbm.pdf
    File Function: First version, 2007
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    Cited by:

    1. Barry Eichengreen & Katharina Steiner, 2008. "Is Poland at Risk of a Boom-and-Bust Cycle in the Run-Up to Euro Adoption?," NBER Working Papers 14438, National Bureau of Economic Research, Inc.

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