The Economics of Demand Led-Growth: Theory and Evidence for Brazil

José Luís Oreiro, Luciano Nakabashi, Guilherme Jonas and Gustavo Jose de Guimaraes e Souza
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Guilherme Jonas: Universidade Federal de Uberlândia (UFU)

No 339, Working papers - Textos para Discussao do Departamento de Economia da Universidade de Brasilia from Departamento de Economia da Universidade de Brasilia

Abstract: The objective of the present article is to present the theory of demand-led growth and some econometric evidence of the existence of a demand-led growth regime for the Brazilian economy. Initially, we will do a brief review of the theory of demand-led growth, based on Kaldor’s (1988) contribution for the theme. According to Kaldor, long-run growth is determined by the sum of the growth rate of government consumption spending and the growth rate of exports. Based on the methodology developed by Atesoglu (2002), we run some econometric tests for the hypothesis of a demand-led growth regime for the Brazilian economy. The results of the tests show that almost 85% of the growth rate of real GDP in the period 1990-2005 is explained by variables at the demand side of the economy, mainly exports growth and government consumption. However, due to the fiscal crisis of Brazil, growth can´t be led by fiscal expansion so that the only option for Brazil is to adopt an export led growth model. The econometric tests also show that natural growth rate of the Brazilian economy is endogenous, being determined by the growth rate of aggregate demand. Regarding the determinants of export growth, it is shown that the maintenance of real exchange rate at competitive levels is an important device for developing countries as Brazil.

Keywords: Economic growth; Aggregate Demand; Exports (search for similar items in EconPapers)
Pages: 34 pages
Date: 2010-11
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Related works:
Journal Article: The economics of demand-led growth: theory and evidence for Brazil (2012)
Working Paper: The Economics of Demand Led-Growth Theory and Evidence for Brazil (2007)
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