Vol. 14 No. 1 (1994): Jan-Mar / 1994

Vol. 14 No. 1 (1994)

Jan-Mar / 1994
Published January 1, 1994


The revenue and the inflation: an interpretation of the Brazilian case
Edmar Lisboa Bacha
Brazilian Journal of Political Economy

Available “fundamentalist” interpretations of Brazilian inflation seem unable to
explain why Brazil has such high rate of inflation with such a small public sector operational
deficit. An attempt is made to explain this paradox with the use of the concepts of potential
deficit with zero inflation and the inflationary erosion of budgeted government expenses.
The conclusion is that the resolution of the Brazilian inflationary conflict involves the transfer,
to local governments or the private sector, of a significant share of the current functions
of the federal government.

JEL Classification: E31; H30.

The question of stabilization in the 1980s: an institutional approach
Leda Maria Paulani
Brazilian Journal of Political Economy

This paper deals with the relation between institutions and stabilization problems. Its purposes is to demonstrate that the consideration of the institutions may provide answers for questions that the conventional macroeconomic analysis have not been succeeding in. The main questions is: why, in Brazil, from the beginning of the eighties onward, the inflation rate does not fall to a civilized levels but does not go to a hyperinflationary process? The approach is that provided by the “New Institutional Economics” (NIE) and the tentative hypothesis is that the formal indexation — a allocative institution created by the military government — (PAEG, 1967) — would have displaced the constitutive and fundamental institution, i. e, the money, the official currency. As a result of this process — a different process within Latin America because of the official and legal sign of the Brazilian indexation —, the recurrent rise of prices would have transformed itself into an institution.

JEL Classification: E31; E51.

Currency board
Fernando Antônio Hadba
Brazilian Journal of Political Economy

This paper discusses some aspects of currency boards. It analyzes the formation
of these institutions, the historical experiences of Singapore and Brazil and Lara Resende
currency board proposal.

JEL Classification: E31; E51.

The Constitution, interest and the economy
Clovis de Faro
Brazilian Journal of Political Economy

The promulgation of the Brazilian Constitution of l988, reinstated the so-called
Usury Law. According to this old regulament, which was never revoked but that was made
ineffective due to the extremely high rates of inflation that we have been experiencing since
a long time ago, the rate of interest, in nominal terms, cannot exceed 12% yearly. Aiming to
innovate, while at the same time ignoring the ever-present law of supply and demand, the
1988 Constitution established that ceiling in real terms. The paper focuses not only on the
difficulties of measuring the effective rate of interest that is charged on bank loans, but also
on the almost impossible task of measuring it in real terms. The unavoidable conclusion is
that this new version of the Usury Law will be also rendered ineffective in practice.

JEL Classification: E43; E52; G28.

Trade balance and the real exchange rate: an analysis of cointegration
João Marcus Marinho Nunes
Brazilian Journal of Political Economy

This paper utilizes the methodology of co-integration to test the theoretical
proposition that there is a long run relationship between the trade balance and the real exchange
rate. Several of the commonly used definitions of the real exchange rate were tested
but none showed co-integration with the trade balance. The only measure of the real exchange
rate that was co-integrated with the trade balance was the one defined by the relative
price of tradeables and non-tradeables. The evidence is not inconsistent with the observation
that the direction of causality runs from the real exchange rate to the trade balance.

JEL Classification: F14.

The potential of agribusiness in the frontier
Ana Célia Castro, Maria da Graça D. Fonseca
Brazilian Journal of Political Economy

The sharp contrast between the universal crises faced by the Brazilian economy
during the 80s and the quite successful picture shown by the country’s agribusiness have
been widely recognized. Amongst the positive aspects revealed by the sector’s performance,
the remarkable capacity to attract capital from the Center-South to the frontier must be
stressed. This article’s main subject is the expansion-cum-transformation of the Centro-
Oeste agribusiness frontier. It also analyses the recent changes occurred in the Brazilian
agricultural policy and the answers provided by the private sector.

JEL Classification: Q17; F14.

Notes on dynamic flexibility, cooperation and economic efficiency
José Ricardo Tauile
Brazilian Journal of Political Economy

This paper deals with the new competitiveness standards that are being set in
contemporary capitalism by more cooperative environment among economic agents. It is
argued that economic efficiency can be traced to contemporary forms of cooperation at
grass root levels of the social organization of production, pushing the arena of competition
upwards. Even more efficient performances of flexible automation technologies seem to presuppose
intra-firm and inter-firm cooperative environments, radically departing from previous
conflictive relation standards of modern capitalism. So much so that one of the pillars
of orthodox economics, namely the theory of the firm, have been undergoing profound
modifications to cope with these new facts of contemporary economic life.

JEL Classification: D21; F23; P13.

The minimum income guaranteed as a proposal to remove poverty in Brazil
Eduardo Matarazzo Suplicy, Samir Cury
Brazilian Journal of Political Economy

The Brazilian economy continues presenting the most unequal distribution of income
among all countries in the world. The article presents the consequences of the growing
disparities and considers the pros and cons of the introduction of a Guaranteed Minimum
Income Program, through a negative income tax, as an efficient instrument to remove poverty.
The second part of this work identifies an analytical structure which could reproduce
the effects, on the level of the productive structure, of a process of Income Distribution. The
aim was achieved as a result of the choice of an Input-Output Model which used an enlargement
of the basic Leontief (1951) Model, from a derivation of social accounting matrix,
as resulted in an estimation of the disaggregated multipliers for production, income and

JEL Classification: I31; I32; I38; O15.


The “credibility” of the antiinflationary economic policy and its temporal consistency
Arthur Barrionuevo Filho
Brazilian Journal of Political Economy

This article is a survey about the consequences of the credibility of government
policies, one of the main developments in macroeconomic theory in the 80s. New classical
economists used it to explain why, in the long-run, government policies fail when they intend
to increase the level of employment above the natural rate. Even in the short run, they
only achieve their aims if it is possible to cheat the private sector. The result will be to lose
credibility and inflationary pressures. Other authors developed it as a tool to understand
the relationship between government, political parties and pressure groups with economic
policy. Finally, we comment some papers about the Brazilian inflation based on distributive
conflict and compare them with explanations from credibility of policies.

JEL Classification: E31; E52.


Price of the currencies of privatisation: the effect of different interest rates
Fabio Giambiagi, Ana Paula Fontenelle Gorini
Brazilian Journal of Political Economy

This article develops some formulas to calculate the difference between the price
of the currencies of privatization (so-called “junk money”) in the secondary market and their
face value. A matrix of results, based on different rules of payment of public debt, and several
costs of opportunity (rates of discount) is exposed. The results are useful to distinguish the
effect of differences between the rate of interest of the privatization currencies and the expected
free-market rate of interest from the effect caused by the lack of government credibility.

JEL Classification: H63.

Resume the investment capacity of the economy to guarantee the development
Antônio Corrêa de Lacerda
Brazilian Journal of Political Economy

The gradual opening of the Brazilian economy with the consequent greater
exposure to the international market, the review of the role of the State, as well as the
deregulation process require a new stance in face of these aspects. The need to provide the
minimum conditions necessary for the recovery of investments in the Brazilian economy is
crucial in a scenario of modernization and competitiveness. This requires the combination
of macroeconomic policies that encourage this process as well as the individual action of
the agents in the sense of seeking to improve the standard of quality and productivity.

JEL Classification: E22; O40.

On the “horizontalism” of money supply: response to professor Cardim de Carvalho
Fernando Nogueira da Costa
Brazilian Journal of Political Economy

These comments constitute an analysis about Cardim de Carvalho’s reply for
a critical examination of Keynes’s theory of money. That theory assumed inelasticity of
supply with respect to demand as a necessary attribute of money. This paper examines why
Basil Moore sustains the “horizontalist” approach.

JEL Classification: E12; E51.

Technical progress and income distribution: the interpretation of Luiz Bresser-Pereira
Fabio Anderaos de Araújo
Brazilian Journal of Political Economy

The article examines Bresser-Pereira’s view on distribution of income, presented
in his book Profit, Accumulation and Crisis, regarding the link between the rate of profit
and the rate of interest. The author presents an alternative approach based on the recent
contributions made by Carlo Panico and Massimo Pivetti, both from the University of
Naples. Panico’s model emphasizes both, the risk-return elements and the “storage of value”
aspect, another important function performed by money, which affect the distribution
of income industrial capitalists, workers and bankers. The author also discusses the price
formation methodology when technical change is presented, claiming that Sraffa’s model is
more adequate to understand the evolution of the rate of profit in the long run.

JEL Classification: B24; B31.