Vol. 29 No. 3 (2009): Jul-Sep / 2009

Vol. 29 No. 3 (2009)

Jul-Sep / 2009
Published July 1, 2009


Tamás József Károly Szmrecsányi (1936-2009)
Victor Pelaez
Brazilian Journal of Political Economy


Rethinking the economics of capital mobility and capital controls
Thomas I. Palley
Brazilian Journal of Political Economy

This paper reexamines the issue of international financial capital mobility, which is today’s economic orthodoxy. Discussion is often framed in terms of the impossible trinity. That framing distorts discussion by representing capital mobility as having equal significance with sovereign monetary policy and control over exchange rates. It also distorts discussion by ignoring possibilities for coordinated monetary policy and exchange rates, and for managed capital flows. The case for capital mobility rests on neo-classical economic efficiency arguments and neo-liberal political arguments. The case against capital mobility is based on Keynesian macroeconomic inefficiency arguments, neo-Walrasian market failure arguments, and neo-Marxian arguments regarding distortion of the social structure of accumulation. Close examination shows the case for capital mobility to be extremely flimsy, pointing to the ideological dimension behind today’s policy orthodoxy.

JEL Classification: F00; F32; F33.

From populism to exchange rate bands: the evolution exchange rate policy in Chile from 1970 to 1999
Patrícia Helena F. Cunha, Paulo Gala
Brazilian Journal of Political Economy

We discuss in this paper the evolution of exchange rate policy in Chile since the seventies, with special attention to overvaluation and undervaluation cycles. Following a recent literature that argues in favor of competitive currencies as part of a development strategy, we argue that the Chilean exchange rate policy in the years that go from 1984 until 1999 were very important to its growth results. Chile even managed to go through the nineties without a major external crisis, especially when compared to its Latin American neighbors. We argue here that the exchange rate crawling band adopted in the middle eighties and nineties was important for its growth strategy.

JEL Classification: O11; F31; F4; F02.

Valuation models and Simons bounded rationality
Alexandra Strommer de Faria Godoi
Brazilian Journal of Political Economy

This paper aims at reconciling the evidence that sophisticated valuation models are increasingly used by companies in their investment appraisal with the literature of bounded rationality, according to which objective optimization is impracticable in the real world because it would demand an immense level of sophistication of the analytical and computational processes of human beings. We show how normative valuation models should rather be viewed as forms of reality representation, frameworks according to which the real world is perceived, fragmented for a better understanding, and recomposed, providing an orderly method for undertaking a task as complex as the investment decision.

JEL Classification: D83; M21; Y4.

Inflation targets, monetary policy and investment: a study for seventeen countries
Luis Alberto Pelicioni, Marco Flávio da Cunha Resende
Brazilian Journal of Political Economy

In this paper two hypotheses about the relationship between monetary policy and investment in the context of the inflation target system were tested. One of these hypotheses is based on the idea of neutrality of money, and the other hypothesis is based on the reject of that idea. An investment equation for seventeen economies using a piece-wise dummy variable was estimated by the Methodology of Panel Data. The results highlight that a negative correlation between current expectation of restrictive monetary policy and current investment rose after the inflation target system implementation.

JEL Classification: E12; E13; E22;E52.

Inflation targets: lessons from the Greenspan era
Simone Silva de Deos, Rogério P. de Andrade
Brazilian Journal of Political Economy

This paper approaches the experience of monetary policy in the Greenspan period and suggests what lessons could be learnt. The adoption of inflation targeting would denote a step backward in the policymaking process in the USA, for, since the 1980s, a distinctive feature is flexibility of response to adjust to unexpected events and changing environments. The Fed was able to exercise an informed judgement in critical situations and this opens the case for the importance of not restraining policymakers’ actions through the adoption of tight rules. Furthermore, that the various experiences with inflation targeting are indisputably huge successes, and that this framework represents the state of the art (therefore nothing else can alternatively be done), remains to be seen.

JEL Classification: E52; E58.

Different wage policy patterns in Brazilian states: an analysis based on the public-private wage differential
Gabriela Miranda Moriconi, João S. Moura Neto, Nelson Marconi, Paulo Roberto Arvate
Brazilian Journal of Political Economy

Public servant wages represent a significant part of Brazilian state governments’ current expenses. Based on the literature, this paper has tried to identify which states practice efficient, compensatory or appropriation wage politics through the estimation of public-private wage differentials. The differential of salaries was calculated between 1995 and 2004 following the Oaxaca’s technique. The results show that the wage policy of an important number of states has had efficiency and a numerous part of the North and the Northeast states have developed compensatory politics. The Federal District and Roraima practiced a wage policy characterized by explicit appropriation.

JEL Classification: H76; J31; J4.5

Welfare State and employment in health activities in developed countries since the Post-Second World War
Luiz Marcos de Oliveira Silva, Fernando Mansor de Mattos
Brazilian Journal of Political Economy

The article analyzes the economic importance of the health activities in the developed countries in the last decades of the twentieth century. It takes into consideration the evolution of the weight of the employment in the health activities in European countries’ and also in the United States’ labour markets, which will be compared in an historical perspective. The evolution and the weight of the public expenditure in the health activities will also be taken into account so as to analyze the economic importance of the sector in the last decades of twentieth century. The role played by the political, economic and social context of the post-Second World War in the construction of the system of social protection (Welfare State) and its effects over the health activities will be also considered.

JEL Classification: N34; I18; J40; J44.

Conditional validity of the equilibrium in Keynes' General Theor
Ricardo Ramalhete Moreira
Brazilian Journal of Political Economy

 It discusses that the equilibrium in Economics, as a method of analysis, has a conditional utility, when it is not necessary its association with ideal situations and with a constancy of structural parameters of the system. Keynes (1936) appears as an example of a good utilization of that method, for he doesn't link it with notions of social potmum or with a necessary system's structural stability.

JEL Classification: B40; E12.

The trend towards international harmonization of patents’ protection and its problems
Ronaldo Fiani
Brazilian Journal of Political Economy

 TRIPS agreement has been a milestone in the present trend towards international harmonization of intellectual property’s protection (including patents’ protection), where harmonization means to increase the protection level in developing countries according to the more rigorous standards of developed ones. Considering the economic theory of patents together with historical and empirical evidences, it is argued that international harmonization of patents’ protection as it is settled by TRIPS agreement is not favorable to developing countries’ economic development.

JEL Classification: P14; O34; F13.

The new Brazilian bankruptcy law: first impacts
Aloisio Araujo, Bruno Funchal
Brazilian Journal of Political Economy

The goal of this paper is to analyze the premiere effects of the New Brazilian Bankruptcy Law, measuring its impact over the amount of bankruptcies and judicial reorganizations, and the firms' access to credit. Making use of econometric models we find that the amount of bankruptcies (requested and decreed) suffered a strong and immediate impact, reducing it in a significant way as well as the requirement of judicial reorganizations. Finally, using sectorial aggregated credit data, we find an expansion of the credit market, mainly to commercial, rural and services sectors. Additionally we did not evidence changes at the average interest rate charged to firms.

Jel Classification:

How does Brazilian private investment respond to increases in the gross tax burden? An econometric investigation.
Cláudio H. dos Santos, Manoel Carlos de Castro Pires
Brazilian Journal of Political Economy

This article aims to offer three contributions to the debate on the recent performance of the Brazilian economy. First, it presents approximate quarterly figures for the Brazilian private investment beginning in 1995. Second, it presents estimates of the Brazilian “investment function” which are robust to the presence of structural breaks. Third, it discusses the sensitivity of private investment to increases in the gross aggregate tax rate. Estimates based on national accounting data prior to march 2007 seem to indicate that an increase of 1% of GDP in the tax rate is associated with a reduction of 1% in private investment.

JEL Classification: C22; C82; E22.

The effects of educational policies in the economic growth theory and dynamic panel data estimates
Joilson Dias, Maria Helena Ambrósio Dias, Fernandina Fernandes de Lima
Brazilian Journal of Political Economy

In this paper, we develop a theoretical model that considers a non-linear relationship between growth and level of education (human capital). Our econometric estimates demonstrated the causality running from human capital to GDP per capita with U inverted shape. The level of education (human capital) that generates the maximum growth rate lies around 4.5 years. The foremost implication of this result is that States with level of education below this range should have as priority educational policies.

JEL Classificion: O15; C33.

Institutional and financial innovations in the U.S. housing finance system
Rafael Fagundes Cagnin
Brazilian Journal of Political Economy

 This article has the gold of summarize the institutional modifications of the US housing finance system between the 60´s and the end of the 90´s. Those changes narrowed the bonds between this segment of the credit market and the securitized financial markets, encouraging the foundation and diffusion of financial innovations that are in the core of the current financial crises.

JEL Classification: G1; G21; N22.

The architecture of the current international financial system
Maryse Farhi, Marcos Antonio Macedo Cintra
Brazilian Journal of Political Economy

This paper discusses some features of financial institutions and instruments which originated the financial crisis triggered by increasing default rate, household real estate and financial asset depreciation combined with U.S. subprime mortgages. The first part presents major crisis events in a chronological order. The second part describes the interconnection of the institutions and markets which engendered a global shadow financial system. The third part focuses on an overview of measures taken by government authorities and large banks to bring about possible solutions for the global financial crisis.

JEL Classification: G01; G21; G24.


Comments on the paper "Banking and regional inequality in Brazil: an empirical note"
Rodolfo Hoffmann
Brazilian Journal of Political Economy


Reply to the comment of Rodolfo Hoffmann
Marcos A. M. Lima, Marcelo Resende
Brazilian Journal of Political Economy