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Effects of the Rural Credit Interest Rate Equalization Policy on Brazilian Regions Economic Growth

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  • Cardoso, Débora Freire
  • Teixeira, Erly Cardoso
  • Gurgel, Ângelo Costa
  • de Castro, Eduardo Rodrigues

Abstract

The objective of this paper is to evaluate the impact of government spending with the Interest Rates Equalization (IRE) policy on the economic growth of Brazilian regions. Additionally, it aims to measure the opportunity cost of the subsidy in relation to an alternative application in the transportation sector. The model, database, and software from the General Equilibrium Analysis Project of the Brazilian Economy (PAEG) are applied to the simulations. The result shows that the IRE policy provides economic growth in the Midwestern, Northeastern and Southern regions above the cost of the policy. Besides, in the Northern and Southeastern regions, there is a decrease in the GDP. For Brazil, the policy is cost-effective and offers a 34% return. Furthermore, all regions benefit in terms of welfare. For the country, in terms of GDP or welfare, spending on the IRE has zero opportunity cost. The IRE policy is efficient and contributes to reducing regional disparities.

Suggested Citation

  • Cardoso, Débora Freire & Teixeira, Erly Cardoso & Gurgel, Ângelo Costa & de Castro, Eduardo Rodrigues, 2011. "Effects of the Rural Credit Interest Rate Equalization Policy on Brazilian Regions Economic Growth," Conference papers 332107, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332107
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    2. Hu, Ming-Che & Hobbs, Benjamin F., 2010. "Analysis of multi-pollutant policies for the U.S. power sector under technology and policy uncertainty using MARKAL," Energy, Elsevier, vol. 35(12), pages 5430-5442.
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