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Type:	Artigo de Periódico
Title:	Brazilian monetary and fiscal policies from 2011 to 2017: conventions and crisis
Authors:	Philip Arestis Fernando Ferrari Filho Marco Flávio da Cunha Resende Fábio Bittes Terra
Abstract:	These international economists argue that Brazil made two major errors. One was monetary policy. The other was to practice austerity rather than make needed public investments. What we have there now is a political crisis. In chapter 18 of The General Theory of Employment, Interest and Money (GT), and when summarizing the book’s idea, Keynes (Citation1964) states that the three variables that explain the dynamics of employment, income, and wealth creation in the economy are the propensity to consume, the expectation of capital assets’ future yield, and the liquidity preference. Among these variables, investment expectations and liquidity preference are both crucial to galvanizing the economy. Moreover, they have a strong causal relationship: worse expectations lead to liquidity preference and lower productive investment, and vice versa. Also, as expectations and liquidity preference are subjective, they comprise another side of human behavior, namely, uncertainty. In view of uncertainty, there is no sureness about the future, only expectations, so it is important to understand the grounds for them. Expectations are founded on “partly existing facts which we can assume to be known more or less for certain, and partly future events which can only be forecasted with more or less confidence” (Keynes Citation1964, 147). In the GT, among the more or less well-known considerations, Keynes highlights one in particular: conventions, which are beliefs shared by individuals that help them to form their expectations for the future. Among the most important conventions are those regarding how to conduct economic policies, particularly fiscal, monetary, and exchange policies. They are responsible for constituting a basis for private expectations and also for shaping an institutional structure that creates an environment favorable to private-sector decisions to invest, which are fundamental to long-term economic dynamics. Given that, the aim of this article is to examine the Brazilian economic policies, particularly monetary and fiscal, from 2011 to 2017. In this context, two analyses are performed. On the one hand, it is shown how the adoption of economic policies from 2011 to 2014 brought conventions into disarray, thus wasting the opportunity to bring the historically high Brazilian interest rates to a lower plateau. We call this wasted opportunity as the “mistakes of the past.” On the other hand, this contribution describes and analyzes how, after 2015, fiscal policy has been structured along “expansionary contraction” lines, both in efforts to achieve a short-term fiscal adjustment and in the proposed New Fiscal Regime (NFR), the so-called Fiscal Spending Cap Amendment approved by the National Congress in December 2016, also supported by the Michel Temer government. It constrained public spending in accordance with the government’s endeavor to forcefully deliver fiscal consolidation. The idea is to make it clear that, had a fiscal reform along the lines of Keynesian proposals occurred, there would have been a chance of forming more optimistic long-term conventions rather than “wasting future opportunities,” as it is termed here. To that end, the second section of this article discusses the role of conventions in the formation of expectations, which serves as the theoretical framework for analyzing the Brazilian monetary policy in the period 2011–2014 and the fiscal policy post-2015, in order, respectively, to point to “the mistakes of the past” and the “waste of future opportunities.” In this sense, the third section examines the monetary policy over 2011–14 to show the “mistakes of the past,” while the fourth section presents the “waste of future opportunities” as being the fiscal consolidation adopted in Brazil in the period after 2015. The fifth section offers some final remarks.
Subject:	Brasil Politica monetária Investimentos Politica monetaria no Brasil
language:	eng
metadata.dc.publisher.country:	Brasil
Publisher:	Universidade Federal de Minas Gerais
Publisher Initials:	UFMG
metadata.dc.publisher.department:	FCE - DEPARTAMENTO DE CIÊNCIAS ECONÔMICAS
Rights:	Acesso Restrito
metadata.dc.identifier.doi:	https://doi.org/10.1080/05775132.2019.1606540
URI:	http://hdl.handle.net/1843/59045
Issue Date:	2019
metadata.dc.url.externa:	https://www.tandfonline.com/doi/full/10.1080/05775132.2019.1606540
metadata.dc.relation.ispartof:	Challenge
Appears in Collections:	Artigo de Periódico

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