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https://hdl.handle.net/2142/70734
Description
Title
Inflation in Brazil: 1974-1980
Author(s)
Souza, Juarez De
Issue Date
1982
Department of Study
Economics
Discipline
Economics
Degree Granting Institution
University of Illinois at Urbana-Champaign
Degree Name
Ph.D.
Degree Level
Dissertation
Keyword(s)
Economics, Commerce-Business
Abstract
The Brazilian economy has been characterized since the first-oil shock in 1973 by severe inflation accompanied by declining rates of economic growth and persistent disequilibrium in the balance of payments. Thus, annual inflation rates skyrocketed from 15% in 1973 to 120% in 1980, measured by the Wholesale Price Index, while economic growth declined from an average annual rate of 11.3% between 1970 and 1973 to 7.1% between 1974 and 1980. Current account deficits monotonically increased from a yearly average of US $1.5 billion in 1971 and 1973 to US $12.9 billion in 1980; the net foreign debt rose from a yearly average of US $5.5 billion in 1971 and 1973 to US $46.9 billion in 1980. (US $61 billion in December 1981.) Consequently, the ratio of the country's debt servicing outlays to its export revenues practically doubled between the end of the economic boom in 1973 and 1980, when it reached 56%.
Economic policies between 1974 and 1980 were designed to cope primarily with the simultaneous external and internal disequilibriums--a period during which there also began a political opening process, that is, a slow transition from the military regime towards democracy.
Since both the inflation problem and the BOP situation worsened in the 1974 and 1980 period, this study concentrates on the extent to which the set of applied economic policies were or were not consistent with these problems. Moreover, two basic questions are considered. First, why did the military government lose control of two of its most important achievements: stabilization and economic growth? Second, why was neither internal equilibrium maintained nor external equilibrium achieved?
Clearly the oil shocks of 1973 and 1979 were important contributors to these conditions. However, the basic hypothesis investigated in this Thesis is that monetarism failed throughout the period because the pursued strategy based on real liquidity squeeze did not consider the financial structure of the productive and commercial firms. In other words, the composition of capital in the system was neglected. Thus, the impact of financial shocks, both from abroad and from deliberate domestic measures to combat inflation, followed accordingly. Six chapters were developed.
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