Vol. 37 No. 1 (2017): Jan-Mar / 2017

Vol. 37 No. 1 (2017)

Jan-Mar / 2017
Published February 26, 2020


The theory of endogenous money and the LM schedule: prelude to a reconstruction of ISLM
Thomas I. Palley
Brazilian Journal of Political Economy

Money is at the center of macroeconomics, which makes understanding the money supply central for macroeconomic theory. This paper presents the Post Keynesian theory of endogenous money supply and shows how it is fundamentally different from the conventional money supply theory. The conventional approach relies on the money multiplier and bank lending is invisible. Post Keynesian theory discards the money multiplier and focuses on bank lending which drives money creation. The paper emphasizes the structuralist version of Post Keynesian theory which retains Keynes’ liquidity preference theory of long term interest rates and also recognizes banks are subject to financial constraints that limit their lending activities. The paper then shows how to derive the LM schedule in an endogenous money economy, which is a necessary prelude to reconstructing the ISLM model.

JEL Classification: E51; E52; E58.

The economy as a socially constructed object in the regulationnist and the Social Market Economy analyses
Miguel Bruno, Ricardo Caffe
Brazilian Journal of Political Economy

This paper discusses the ontological arguments in favor of a methodological approach that recognizes the specific characteristics of economic phenomena, compared with those found in inorganic and organic systems. Their epistemological position is anti-positivist and anti-neoclassical because it rejects the attempt to analyses the socio-economic system by analogy with the physical and biological systems. In fact, this is a methodologic mistake, which occurs since the birth of Economic Science with the Phy siocracy. These physicalist and organicist views contributes to weaken the heuristic, explanatory and predictive ability of the economic theories. To explore this issue, the present paper starting with a comparative analysis of the Regulation theory and the Social Market Economy, theoretical currents where the concept of the institution and the historicity inherent in the production and distribution relationships are considered central. Unlike the objects of Physics and Biology, whose regularities and processes were not originally created by the human praxis, the economic object is socially and politically constructed and must have therefore specific theoretical and methodological status. Consequently, the relevance of the theories in the face of the observed economic regularities cannot be achieved by an axiomatic approach that makes the economy an essentially logical-deductive science and ahistorical by construction, nor the assumption of the existence of invariant general laws, purely economic and inescapable.

JEL Classification: A11; B1; B2; B4; B5.


Monetary policy in the post Keynesian theoretical framework
Philip Arestis, Fábio Henrique Bittes Terra
Brazilian Journal of Political Economy

The purpose of this contribution is to develop a Post Keynesian monetary policy model, presenting its goals, tools, and channels. The original contribution this paper develops, following Keynes’s (1936, 1945) proposals, is the use of debt management as an instrument of monetary policy, along with the interest rate and regulation. Moreover, this paper draws its monetary policy model by broadly and strongly relying on Keynes’s original writings. A monetary policy model erected upon this basis relates itself directly to the Post Keynesian efforts to offer a monetary policy framework substantially different from the Inflation Targeting Regime of the New Macroeconomic Consensus.

JEL Classification: E12; E5; E42.

Raúl Prebisch and the conception and evolution of the core-periphery system
Joaquim Miguel Couto
Brazilian Journal of Political Economy

This paper describes the career of Raul Prebisch and, at the same time, analyze his theoretical contribution when he tried to decipher the history and problems of economic development in Latin America. From adviser to ministers to the direction of the Argentine Central Bank, from ECLAC to UNCTAD he faced many battles. While worked in public positions, Prebisch was theoretically interpreting the world in which he lived. Thus emerged the core-periphery system, which included ideas of growth, the deteriorating terms of trade and the struggle for industrialization through import substitution.

JEL Classification: B31; B22; O14.

Democracy and growth in pre-industrial countries
Luiz Carlos Bresser-Pereira
Brazilian Journal of Political Economy

This paper distinguishes three types of countries (rich, middle-income, and pre-industrial) and focus on the latter, which, in contrast to the other two, didn’t complete their industrial and capitalist revolutions. Can pre-industrial countries be governed well and under democracy? Today democracy is a universal value, and, so, these countries are under pressure from the West and from its own society to be democratic, even though they do not dispose of mature enough societies in which the economic surplus is appropriated through the market. In fact, no country completed its industrial and capitalist revolution within the framework of even a minimal democracy. Additionally, pre-industrial countries are extremely difficult to govern because they usually don’t have a strong nation and capable states. This double pressure represents a major obstacle to their development.

JEL Classification: P01; P16.

Capital account regulation in Brazil: an assessment of the 2009-2013 period
Daniela Magalhães Prates, Luiz Fernando de Paula
Brazilian Journal of Political Economy

Brazil was one of the emerging countries that had a stronger trend of currency appreciation from the 2nd quarter of 2009 to July 2011. Under this context that can be understood the implementation of capital account regulation (CAR) after 2009, which was complemented with another kind of regulation, the so-called FX Derivatives Regulation (FXDR). This paper shows that only when Brazilian government adopted these two kinds of regulations simultaneously, the policy effectiveness increased in terms of protecting the Brazilian currency from upward pressures. Brazilian experience also highlights that it is not possible to establish a hierarchy between temporary instruments to manage capital flows and permanent prudential measures, as supported by the IMF current approach.

JEL Classification: F31; F32; F53,

Why Dilmas governmente cannot be classified as new developmentalist?
Marcelo Curado
Brazilian Journal of Political Economy

This paper examines the role of new developmentalist agenda for actions in the economic area of Dilma Rousseff's government. The paper aims to contribute to the research area that examines the relevance of schools of economic thought to economic policy in Brazil. The central conclusion is that - despite the increase in the state intervention in the economy - we cannot argue that the new developmentalist agenda played an important role in Dilma Rousseff's government. The absence of a "national development strategy" and essential elements of the new developmentalist macroeconomic policy support this conclusion.

JEL Classification: N16; O11; O54.

The Euro and the recent european crisis vis-à-vis the gold standard and the great depresssion: Institutionalities, specificities and interfaces
Giuliano Contento de Oliveir, Paulo José Whitaker Wolf
Brazilian Journal of Political Economy

The paper aims to establish interfaces between the Great Depression of the 1930s under the Gold Standard and the recent European Crisis under the Euro. It is argued that, despite their specificities, both crises revealed the potentially harmful effects, in economic and social terms, of institutional arrangements that considerably reduce the autonomy of monetary, fiscal and exchange rate policies of participating countries, without being accompanied by increased cooperation between them, which should be led by a global (in the case of the Great Depression) or regional (in the case of the European Crisis) hegemonic power, which is not only capable of, but is also willing to act as a buyer and lender of last resort, especially in circumstances characterized by increased uncertainty, the deterioration of the general state of expectations and increased liquidity preference. In fact, central European countries in the past and peripheral European countries nowadays were effectively pushed toward deflationary adjustments in which a reduction of prices and wages was accompanied by a reduction of output and employment levels. Thus, in the absence of the possibility of restoring the autonomy of economic policy, the overcome of the crisis necessarily requires, both before – under the Gold Standard - and nowadays – under the Euro –, joint actions aimed to assure that the responsibility for the adjustment will be equally distributed among all the economies, in order to avoid that some of them benefit at the expense of the others in this process.

JEL Classification: F50; F55; N10.

Why was there no capitalism in early modern China?
Tiago Nasser Appel
Brazilian Journal of Political Economy

In this paper, we ask the following question: why couldn’t Early Modern China make the leap to capitalism, as we have come to know it in the West? We suggest that, even if China compared well with the West in key economic features – commercialization and commodification of goods, land, labor – up to the 18th century, it did not traverse the path to Capitalism because of the “fact of empire”. Lacking the scale of fiscal difficulties encountered in Early Modern Europe, Late Imperial China did not have to heavily tax merchants and notables; therefore, it did not have to negotiate rights and duties with the mercantile class. More innovatively, we also propose that the relative lack of fiscal difficulties meant that China failed to develop a “virtuous symbiosis” between taxing, monetization of the economy and public debt. This is because, essentially, it was the mobilization of society’s resources – primarily by way of public debt or taxes – towards the support of a military force that created the first real opportunities for merchants and bankers to amass immense and unprecedented wealth.

JEL Classification: N; H2; F5.

Transformation in the global productive structure, deindustrialization and industrial development in Brazil
Celio Hiratuka, Fernando Sarti
Brazilian Journal of Political Economy

This paper aims to highlight the major changes in the global economy that affect Brazilian industrial development and mark out the strategies that could move the country toward a more robust productive structure. It is argued that the debate on deindustrialization in Brazil, although it had an important contribution to highlight the importance of manufacturing for economic development, did not deep the discussion about the limits and possibilities of Brazilian industrial development. That debate did not adequately consider those changes in the global economy, related to the more fierce global competition scenario and to the changes in the strategies of Transnational Corporations.

JEL Classification: O1; O5; F6.

A critical realist perspective on collective action in economics
Thiago Duarte Pimentel, Rodrigo Siqueira Rodriguez
Brazilian Journal of Political Economy

The mainstream of traditional economics assumes that the analyses of the economic relations is the individual, by the economic relationship among themselves (exchange) or by the economic relationship among individuals and things (production factors). Hardly the economical science takes assumptions about collectively organized individuals. In general, when it is done, it assumes that it is an effect of aggregate actions of isolated individuals, which means it lays on the grounds of methodological individualism. In microeconomics, for example, a statement about a group of individuals, a firm or a society, necessarily assumes that their actions are aggregate from the effects of individual optimizations, even if this requires very strict conditions for the individual beliefs and desires. This paper aims to present an alternative analytical framework to that paradigm, simultaneously compromised with a realist analysis and incorporating empirical and contextual elements allusive to human conduct. Positioning our emphasis in the meso-sociological level of analysis, we argue that the analysis of collective action, informed by critical realism, could be an alternative to drive the study of economics

JEL Classification: B1; B41; B5,

Is the balance of payments a restriction to the economic growth of Brazilian states? An analysis for the 1991-2009 period
Felipe de Souza Bastos, Guilherme Irffi, Ivan Castelar
Brazilian Journal of Political Economy

This paper investigates whether there is a restriction imposed by the balance of payments – through the relationship between income elasticities of imports and exports - on the economic growth of Brazilian states. In other words, it checks the validity of Thirlwall's Law to the Brazilian states in the period from 1991 to 2009. These elasticities were estimated using the dynamic panel estimator system-GMM, which circumvents the classical endogeneity problem inherent to dynamic panels. The results point out to the validity of the law, since the income elasticity of imports was higher than the income elasticity of exports.

JEL Classification: E12; F00; C01.

Monetary cooperation: an analysis on SUCRE
Alexandre Jerônimo de Freitas, Marcelo Pereira Fernandes
Brazilian Journal of Political Economy

The initiative of the Unified System for Regional Compensation, the so-called SUCRE, concerted between the main countries that comprise ALBA, born in a context of great international turmoil caused by the financial crisis of 2008. Still in the consolidation process, the system has very ambitious goals, including the use of the progressive decoupling of the dollar. The aim of this paper is to analyze the SUCRE in force since January 2010. The initiative may be a key step towards construction of a new regional financial architecture to reduce external vulnerability and structural asymmetries in the region.

JEL Classification: F02.


Marxista e pós-Keynesiana
Maria de Lourdes Rollemberg Mollo
Brazilian Journal of Political Economy