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Combination of economic policies: how the perfect storm wrecked the Brazilian economic growth

Author

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  • Helder Ferreira de Mendonça

    (Department of Economics)

  • Iven Silva Valpassos

    (Department of Economics
    Petrobras and Fluminense Federal University)

Abstract

This study uses a counterfactual analysis to investigate, from the Brazilian experience, the “perfect storm” resultant from the combination of economic policies on economic growth. Specifically, we analyze whether the combination of economic policies that neglect fiscal balance and low and stable inflation with the adoption of strategies to stimulate economic growth without considering the side effects on the economy harmed economic growth. Our findings, robust to several placebo tests, show Brazil’s growth rate is approximately 2.8 pp below the “synthetic Brazil” growth rate. Furthermore, comprehending the great shocks in the period under investigation, the complementary empirical analysis supports the view that the “perfect storm” is the main factor explaining the underperformance of the Brazilian economic growth.

Suggested Citation

  • Helder Ferreira de Mendonça & Iven Silva Valpassos, 2022. "Combination of economic policies: how the perfect storm wrecked the Brazilian economic growth," Empirical Economics, Springer, vol. 63(3), pages 1135-1157, September.
    • Handle: RePEc:spr:empeco:v:63:y:2022:i:3:d:10.1007_s00181-021-02167-4
    DOI: 10.1007/s00181-021-02167-4
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    References listed on IDEAS

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    1. Joe A. Stone, 2016. "Do Balanced-Budget Rules Increase Growth?," Bulletin of Economic Research, Wiley Blackwell, vol. 68(1), pages 79-89, January.
    2. Ernesto Dal Bó & Pedro Dal Bó & Erik Eyster, 2018. "The Demand for Bad Policy when Voters Underappreciate Equilibrium Effects," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 85(2), pages 964-998.
    3. Chinn, Menzie D. & Ito, Hiro, 2006. "What matters for financial development? Capital controls, institutions, and interactions," Journal of Development Economics, Elsevier, vol. 81(1), pages 163-192, October.
    4. Richard McManus & F. Gulcin Ozkan, 2015. "On the Consequences of Pro‐Cyclical Fiscal Policy," Fiscal Studies, Institute for Fiscal Studies, vol. 36, pages 29-50, March.
    5. Domenico Lombardi & Pierre Siklos & Samantha St. Amand, 2018. "A Survey Of The International Evidence And Lessons Learned About Unconventional Monetary Policies: Is A ‘New Normal’ In Our Future?," Journal of Economic Surveys, Wiley Blackwell, vol. 32(5), pages 1229-1256, December.
    6. de Guimarães e Souza, Gustavo José & de Mendonça, Helder Ferreira & de Andrade, Joaquim Pinto, 2016. "Inflation targeting on output growth: A pulse dummy analysis of dynamic macroeconomic panel data," Economic Systems, Elsevier, vol. 40(1), pages 145-169.
    7. David F. Hendry & Hans-Martin Krolzig, 2004. "We Ran One Regression," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 66(5), pages 799-810, December.
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    Cited by:

    1. Thomas H. W. Ziesemer, 2023. "Semi-endogenous growth in a non-Walrasian DSEM for Brazil: estimation and simulation of changes in foreign income, human capital, R&D, and terms of trade," Economic Change and Restructuring, Springer, vol. 56(2), pages 1147-1183, April.

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    More about this item

    Keywords

    Economic policies; Economic growth; Emerging and developing countries;
    All these keywords.

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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