Brazil’s Long-Term Growth Performance—Trying to Explain the Puzzle

IMF Working Papers, December 1, 2006

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Canonical URL: Brazil’s Long-Term Growth Performance—Trying to Explain the Puzzle

This paper assesses Brazil's growth performance from a long-term perspective, using crosscountry and panel estimation techniques, building on the vast empirical literature on growth.
The empirical evidence presented in this paper confirms that macroeconomic stability and several reforms have helped raise per capita growth in Brazil since the mid-1990s.
The results also show that some long-standing structural weaknesses continue to weigh negatively on per capita growth.
Reducing the high level of government consumption would help lower the overall consumption level in the economy and lower its intertemporal price-the real interest rate-thus helping to foster investment and growth.

Macroeconomic stability and several reforms have helped raise per capita growth in Brazil since the mid-1990s.
Long-standing structural weaknesses continue to weigh negatively on per capita growth.
High level of government consumption is identified as a constraint: reducing it would help lower the overall consumption level in the economy and lower the real interest rate, fostering investment and growth.

Reduce the high level of government consumption to:
- Lower the overall consumption level in the economy.
- Lower the intertemporal price—the real interest rate.
- Help foster investment and growth.

Subject: Fiscal policy, Government consumption, International liquidity, Real exchange rates, Real interest rates
Keywords: Brazil, exchange rate, GDP, growth performance, sc, WP