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Competitiveness and convergence in Portugal

Listed author(s):
  • Jorge Braga de Macedo

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

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).

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Paper provided by Gabinete de Estratégia e Estudos, Ministério da Economia in its series GEE Papers with number 0004.

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Length: 15 pages
Date of creation: Nov 2007
Date of revision: Nov 2007
Handle: RePEc:mde:wpaper:0004
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