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The economics of demand-led growth. Theory and evidence for Brazil
- Source: CEPAL Review, Volume 2012, Issue 106, May 2012, p. 151 - 168
- Spanish
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- 05 May 2012
Abstract
This article describes the theory of demand-led growth and provides evidence that a demand-led growth regime exists in the Brazilian economy. Based on the methodology developed by Atesoglu (2002), econometric tests of this hypothesis show that almost 85% of the growth rate of real gdp in the period 1990-2005 is explained by demand-side variables, mainly exports and government consumption. As the current fiscal crisis rules out fiscal expansion, Brazil’s only option is to adopt an export-led growth model. The article also shows that the maintenance of undervalued real exchange rate is a major determinant of export growth in developing countries such as Brazil.
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