scholarly journals BRAZILIAN FINANCIAL CRISIS IN THE 1980S: HISTORICAL PRECEDENT OF AN ECONOMY GOVERNED BY FINANCIAL INTERESTS

2019 ◽  
Vol 23 (3) ◽  
Author(s):  
Fabiano Abranches Silva Dalto
Keyword(s):  
Public Sector ◽  
Financial Crisis ◽  
Interest Rates ◽  
Public Investment ◽  
Financial Instability ◽  
Budget Deficits ◽  
Government Deficits ◽  
External Adjustment ◽  
Financial Interests ◽  
Public Deficits

ABSTRACT Beyond representing coordination or government failures, the Brazilian financial crisis in the 1980s characterized the dominance of financial interests on public policies. This paper shows that such dominance began with the external debt negotiations in 1982, which put international creditors’ interest first. It argues that the imposed external adjustment - specially the exchange rates devaluation, public investment cuts and the hike in real interest rates - generated recession and financial instability (notoriously inflation), which would threat depreciating private wealth. Therefore, both the external adjustment and the private wealth protection only turned possible due to the increasing public deficits and debts - including by transferences of debt from private to public sector. The dominant perspective, found in the literature on the period, blaming government deficits and debts for the financial instability of the 1980s is wrong. Economists, even heterodox ones, still believe that Brazil’s financial crisis in the 1980s resulted from budget deficits and public debts. This paper shows, contrary to the dominant view, that once the public sector had to allow private wealth adjustment to the external conditions imposed by foreign creditors, public deficits were the only possible outcome in that conditions.

scholarly journals Government Deficits And The Public Debt: The Endless Controversy

2011 ◽  
Vol 1 (1) ◽  
pp. 22
Author(s):  
Frank J. Bonello
Keyword(s):  
Interest Rates ◽  
Federal Government ◽  
Public Debt ◽  
Relative Size ◽  
American People ◽  
Budget Deficits ◽  
Government Budget ◽  
The Public ◽  
Government Deficits ◽  
The One

No economic topic has attracted more attention during the 1980s than the size of Federal government budget deficits and the corresponding rapid rise in the public debt. Crowding out news regarding Third World debt problems, U.S. foreign trade deficits, and the break up of American Telephone and Telegraph, Federal government budget deficits have been blamed for everything from high interest rates to the deterioration in the moral fiber of the American people. Deficits and debt have also caused political reversal: historically free spending Democrats blaming Reagan deficits for a variety of economic ills while the conservative Republican president treats the deficit with benign neglect.The purpose of this paper is not to answer all of the questions that have been raised regarding the causes and consequences of government deficits and debt. The initial concern is instead with the facts and figures on the absolute and relative size of the Federal governments recent deficits and debt. Next certain measurement issues are addressed for there is a continuing debate regarding appropriate procedures for expressing the governments budgetary outcomes. The third and final section of the paper reviews some of the arguments, theoretical and empirical, on the relation between deficits and debt on the one hand and interest rates on the other. In each section the intent is to survey rather than to present new theoretical arguments or new empirical evidence.

scholarly journals Integrative literature review of the financial fragility hypothesis proposed by Minsky

2021 ◽  
Author(s):  
Cláudio Caríssimo ◽  
Francisval Melo Carvalho ◽  
carlos eduardo Stefaniak Aveline ◽  
Mozar José de Brito ◽  
rafaela maiara caetano
Keyword(s):  
Public Sector ◽  
Fiscal Policy ◽  
Literature Review ◽  
Interest Rates ◽  
Cash Flow ◽  
Empirical Studies ◽  
Financial Fragility ◽  
Financial Instability ◽  
The Public ◽  
Theoretical Assumptions

<p>This paper conducts an Integrative Literature Review on the Financial Fragility Hypothesis presented by Minsky and on Financial Fragility Applied to the Public Sector. Twenty papers were chosen that addressed the proposed theme in both quantitative and qualitative procedures. The topics discussed ways of measuring financial fragility, effects on fiscal policy and need for regulation, relations between investment, cash flow expectations, the influence of interest rates and indebtedness on firms, and financial instability. The integration reinforced the conceptual aspects and propositions presented by Minsky, broadening in an integrated way the understanding of his theoretical assumptions regarding financial fragility, addressing the causes, observations, and economic and institutional consequences, in addition to signaling for insufficiencies of more empirical studies and the public sector.</p>

scholarly journals Are Large Deficits and Debt Dangerous?

2020 ◽  
Vol 110 ◽  
pp. 145-148
Author(s):  
Michael J. Boskin
Keyword(s):  
Financial Crisis ◽  
Interest Rates ◽  
Public Investment ◽  
Private Investment ◽  
Traditional View ◽  
Early Recovery ◽  
Present Evidence ◽  
Long Run ◽  
Tax Smoothing ◽  
Future Income

The traditional view of large deficits and debt is that they are harmful, save in recession/early recovery, for tax smoothing or to fund productive public investment, as they crowd out private investment and lower future income, and taken to extremes, can cause inflation, even a financial crisis. Blanchard (2019) concludes they may have no fiscal cost and increase welfare. I present evidence of a debt problem, policies necessary to contain it, effects on recovery, interest rates, and long-run growth. There are several serious issues with Blanchard's reading of key data and modeling assumptions, the changing of which would reverse his conclusions.

scholarly journals Integrative literature review of the financial fragility hypothesis proposed by Minsky

2021 ◽  
Author(s):  
Cláudio Caríssimo ◽  
Francisval Melo Carvalho ◽  
carlos eduardo Stefaniak Aveline ◽  
Mozar José de Brito ◽  
rafaela maiara caetano
Keyword(s):  
Public Sector ◽  
Fiscal Policy ◽  
Literature Review ◽  
Interest Rates ◽  
Cash Flow ◽  
Empirical Studies ◽  
Financial Fragility ◽  
Financial Instability ◽  
The Public ◽  
Theoretical Assumptions

<p>This paper conducts an Integrative Literature Review on the Financial Fragility Hypothesis presented by Minsky and on Financial Fragility Applied to the Public Sector. Twenty papers were chosen that addressed the proposed theme in both quantitative and qualitative procedures. The topics discussed ways of measuring financial fragility, effects on fiscal policy and need for regulation, relations between investment, cash flow expectations, the influence of interest rates and indebtedness on firms, and financial instability. The integration reinforced the conceptual aspects and propositions presented by Minsky, broadening in an integrated way the understanding of his theoretical assumptions regarding financial fragility, addressing the causes, observations, and economic and institutional consequences, in addition to signaling for insufficiencies of more empirical studies and the public sector.</p>

scholarly journals Testing Keynesian Proposition And Ricardian Equivalence: More Evidence On The Debate

2011 ◽  
Vol 6 (5) ◽  
Author(s):  
George A. Vamvoukas ◽  
Vassilios N. Gargalas
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Budget Deficit ◽  
Cointegration Analysis ◽  
Ricardian Equivalence ◽  
Impulse Response Functions ◽  
Budget Deficits ◽  
Positive Effects ◽  
Government Deficits ◽  
Using Data

This paper takes its motives from recent literature concerning the debate on the Keynesian proposition and the Ricardian equivalence, using data of the Greek economy and applying cointegration analysis, Granger causality tests and impulse response functions (IRF). The aim of the econometric methodology is to derive robust results by means of using alternative quantitative techniques. The empirical analysis shows the existence of dynamic relationships between the budget deficit and the interest rate, indicating a two-way causality between deficits and interest rates. The findings of Granger tests and IRFs contradict the view of Ricardian equivalence that government deficits do not influence the behavior of interest rate. Experimenting with the four-variable system (R, D, Y, P), IRF results show that in the case of Greece the budget deficit positively affects the inflation rate. The evidence that budget deficits exert positive effects on interest rates and inflation is consistent with the rationale of the Keynesian proposition.

Interpreting the Reagan Deficits

2017 ◽  
Author(s):  
Thomas J. Sargent
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Reagan Administration ◽  
Federal Budget ◽  
Ronald Reagan ◽  
Government Budget ◽  
Government Deficits ◽  
Tax Smoothing ◽  
The Government ◽  
Monetary And Fiscal Policy

This chapter examines the large net-of-interest deficits in the U.S. federal budget that have marked the administration of Ronald Reagan. It explains the fiscal and monetary actions observed during the Reagan administration as reflecting the optimal decisions of government policymakers. The discussion is based on an equation whose validity is granted by all competing theories of macroeconomics: the intertemporal government budget constraint. The chapter first considers the government budget balance and the optimal tax smoothing model of Robert Barro before analyzing monetary and fiscal policy during the Reagan years: a string of large annual net-of-interest government deficits accompanied by a monetary policy stance that has been tight, especially before February 1985, and even more so before August 1982. Indicators of tight monetary policy are high real interest rates on government debt and pretax yields that exceed the rate of economic growth.

Economic Patriotism After the Crisis: Explaining Continuity and Change in European Securities Enforcement

2018 ◽  
Author(s):  
Chase Foster
Keyword(s):  
Financial Crisis ◽  
Insider Trading ◽  
Financial Regulation ◽  
Global Financial Crisis ◽  
Financial Supervision ◽  
Financial Centre ◽  
Continuity And Change ◽  
Financial Interests ◽  
Mixed Pattern ◽  
The Uk

Since the global financial crisis, European governments have sought to intensify the supervision of financial markets. Yet, few studies have empirically examined whether regulatory approaches have systematically shifted in the aftermath of the crisis, and how these reforms have been mediated by longstanding national strategies to promote domestic financial interests in the European single market. Examining hundreds of enforcement actions in three key European jurisdictions, I find a mixed pattern of continuity and change in the aftermath of the crisis. In the UK, aggregate monetary penalties and criminal sanctions have skyrocketed since 2009, while in France and Germany, the enforcement pattern suggests continuity, with both countries assessing penalties and prosecuting insider trading at similar rates before and after the crisis. I conclude that financial regulation is still structured by longstanding industrial strategies (Story and Walter, 1997), but where pre-existing regulatory approaches were seen as contributing to the crisis, a broader regulatory overhaul has been pursued. Thus, in the UK, where the financial crisis served as a direct rebuke to the country’s “light touch” regulation, financial supervision was overhauled, and monetary sanctions dramatically increased, to preserve London’s status as an international financial centre. By contrast, in France and Germany, where domestic regulatory systems were implicated by the financial crisis, domestic securities supervision and enforcement was less dramatically altered. While the crisis has led to the further institutionalization of European-level supervisory institutions, these changes have not yet led to convergence in national regulatory approaches.   Full text available at: https://doi.org/10.22215/rera.v12i1.1233

Conclusions

2017 ◽  
Author(s):  
Yilmaz Akyüz
Keyword(s):  
Monetary Policy ◽  
Financial Crisis ◽  
Interest Rates ◽  
Global Financial Crisis ◽  
Developing Economies ◽  
Quantitative Easing ◽  
Unconventional Monetary Policy ◽  
Advanced Economies ◽  
The Global Financial Crisis ◽  
Zero Bound

The preceding chapters have examined the deepened integration of emerging and developing economies (EDEs) into the international financial system in the new millennium and their changing vulnerabilities to external financial shocks. They have discussed the role that policies in advanced economies played in this process, including those that culminated in the global financial crisis and the unconventional monetary policy of zero-bound interest rates and quantitative easing adopted in response to the crisis, as well as policies in EDEs themselves....

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