A Strategy of Development with Stability

Vol. 22 No. 3 (2002)

Jul-Sep / 2002
Published July 1, 2002
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Bresser-Pereira, Luiz Carlos, and Yoshiaki Nakano. 2002. “A Strategy of Development With Stability”. Brazilian Journal of Political Economy 22 (3):533-63. https://doi.org/10.1590/0101-31572002-1246.

A Strategy of Development with Stability

Luiz Carlos Bresser-Pereira
Professor Emérito da Fundação Getúlio Vargas - FGV/SP, São Paulo/SP, Brasil.
Yoshiaki Nakano
Professor da Fundação Getúlio Vargas – FGV/SP, São Paulo/SP, Brasil.
Brazilian Journal of Political Economy, Vol. 22 No. 3 (2002), Jul-Sep / 2002, Pages 533-563

Abstract

To resume economic growth after 20 years of quasi-stagnation depends on a growth strategy that combines macroeconomic stability with growth-oriented policies. The Real Plan stabilized prices, but, as a trade-off, the interest rate skyrocketed while the exchange rate remains artificially appreciated. The main challenge is to reduce the basic interest rate, which is considerably higher than the ones in countries with similar country risk classification. There are several reasons for that including little concern of the monetary authorities with reducing the interest rate, and the inverse relation between the interest rate and the default risk: the high interest rate defined by the Central Bank influences upward the Brazil risk.

JEL Classification: E4; E5; O54.


Keywords: Interest rate exchange rate Brazil risk Central Bank