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    Mystere', 'surprise', 'reproche a la theorie economique', que penser de l'evolution du partage du revenu dans las economies semi-industrialisees latino-americanes?
    (2011-08) Salama, Pierre
    Les années 1980 en Amérique latine se caractérisent à la fois par une hyperinflation dans plusieurs pays, une volatilité élevée du PIB avec un trend plus ou moins orienté à la baisse, une tendance à la stagnation de la productivité, une ponction forte des ressources internes pour financer le service de la dette externe. La part des salaires dans la valeur ajoutée varie fortement à la baisse comme à la hausse, pour plusieurs raisons : 1/ l’hyperinflation a des effets distributifs importants, elle « taxe » les revenus (taxe inflationniste) d’autant plus fortement que ceux-ci sont faibles mais à l’inverse, lorsque le taux d’inflation chute comme ce fut le cas durant les périodes brèves de stabilisation administratives des prix, le salaire réel augmente et sa part dans le revenu croit ; 2/ l’amplitude des variations de salaires est plus élevée que celle de la productivité, surtout en Argentine, et la reprise de l’activité ne s’accompagne pas immédiatement d’une augmentation des salaires (voir annexe). Sur la décennie considérée, la part des profits dans la valeur ajoutée augmente mais au sein des profits, la fraction destinée à la finance s’accroit notamment celle liée au service de la dette externe et surtout interne. Le taux d’investissement fixe baisse, parfois drastiquement. Plusieurs facteurs expliquent à la fois la baisse sur la décennie de la part des salaires dans le revenu, sa volatilité et le découplage des évolutions des salaires et de la productivité: l’hyperinflation de longue durée entrecoupée de stabilisation des prix et la volatilité du PIB.
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    Homogeneous middles vs. heterogeneous tails, and the end of the ‘Inverted-U’: the share of the rich is what it’s all about
    (2011) Palma, José Gabriel
    This paper examines the current global scene of distributional disparities within-nations. There are six main conclusions. First, about 80 per cent of the world’s population now live in regions whose median country has a Gini not far from 40. Second, as outliers are now only located among middle-income and rich countries, the ‘upwards’ side of the ‘Inverted-U’ between inequality and income per capita has evaporated (and with it the statistical support there was for the hypothesis that posits that, for whatever reason, ‘things have to get worse before they can get better’). Third, among middle-income countries Latin America and mineral-rich Southern Africa are uniquely unequal, while Eastern Europe follows a distributional path similar to the Nordic countries. Fourth, among rich countries there is a large (and growing) distributional diversity. Fifth, within a global trend of rising inequality, there are two opposite forces at work. One is ‘centrifugal’, and leads to an increased diversity in the shares appropriated by the top 10 and bottom 40 per cent. The other is ‘centripetal’, and leads to a growing uniformity in the income-share appropriated by deciles 5 to 9. Therefore, half of the world’s population (the middle and upper-middle classes) have acquired strong ‘property rights’ over half of their respective national incomes; the other half, however, is increasingly up for grabs between the very rich and the poor. And sixth, Globalisation is thus creating a distributional scenario in which what really matters is the income-share of the rich — because the rest ‘follows’ (middle classes able to defend their shares, and workers with ever more precarious jobs in ever more ‘flexible’ labour markets). Therefore, anybody attempting to understand the within-nations disparity of inequality should always be reminded of this basic distributional fact following the example of Clinton’s campaign strategist: by sticking a note on their notice-boards saying 'It’s the share of the rich, stupid'.
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    A note on financial regulation and the Brazilian response to the 2008‐09 financial crisis
    (2011-03) Barbosa, Nelson
    Brazil was frequently criticized for its interventionist and heavy financial regulation up until the 2008‐09 world financial crisis.  According to the neo‐liberal or pro‐market view that predominated in academic and financial circles during the early 2000s, economic development came together with financial deepening, which in its turn could only be achieved through financial liberalization and deregulation. The currency crises of the 1990s notwithstanding, by the mid‐2000s Brazil’s segmented financial market and its restrictive reserve and capital requirements were seen as a symbol of inefficiency and backwardness by most financial specialists.  To the luck of the Brazilian population, most of the advices of such specialists were ignored by the Brazilian authorities, so that, when the 2008 financial crisis hit the world economy, Brazil still had powerful and efficient instruments to deal with the problem.  The objective of this note is to present the mains aspects of the Brazilian financial regulation and how they helped the economy to deal with the consequences of 2008‐09 financial meltdown.
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    How to evaluate financial regulation of Brazil
    (2011-03-23) Prates, Daniela Magalhães
    The purpose of this paper is to evaluate the current financial regulation of Brazil, with emphasis on the changes that have occurred after the 2008 global crisis. Before that, this introduction presents the analytical perspective that will be used to think over the financial regulation of an emerging country, such as Brazil.
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    A note on Brazilian financial regulation and governance
    (2011) Barbosa, Fernando de Holanda
    The question posed by Theme 4 of this workshop is indeed a very broad one and would demand a thorough research on the topics involved. I am afraid I did not have the proper time to think it over and I would not be able to provide a wide ranging answer to this question. Thus, I will be selective and I will present the following issues that need to be addressed to support Brazilian development: i) competition among banks; ii) high rate of interest on liquidity; iii) approval by the Congress of a Complementary Law to regulate the financial sector as required by the 1988 Brazilian Constitution; iv) exploitation of workers through the governance of the Job Time Guarantee Fund (FGTS) and iv) state-owned versus government owned enterprises.
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    Financial governance: the Brazilian experience on prudential regulation and its impacts on the effects of the 2008 financial crisis
    (2011-03-25) Bezerra, Rogério Sobreira
    The Brazilian economy was severely hit by the 2008 crisis. In the beginning of the crisis, the vast majorities of the economic agents and authorities thought that Brazil could face some sort of decoupling since some macroeconomic fundamentals were very good. What we saw, however, was that the Brazilian economy was not decoupled, and expectations faced a huge deterioration soon after the bankruptcy of Lehman Brothers in September 15th. Two aspects regarding the impact of crisis in Brazil, however, deserve a great deal of attention: (a) although deep, the impact did not last for a long time. Actually, the GDP growth experienced a good recovery in the second quarter of 2009, showing that the health of the Brazilian economy was good; (b) the Brazilian banking system performed very well during the crisis, although we cannot say the system was not in danger in the worst time of the crisis. In spite of the confidence crisis faced by the banking system 1, it showed a great deal of resilience. In this aspect, we argue that the restructure faced by the banking system in the aftermath of the Real Plan, as well as the development of a solid supervision regulation helped a lot the system to avoid the systemic crisis that was an open possibility to the Brazilian banking system in the end of 2008. These notes, thus, discusse why the Brazilian banking system performed pretty well in the 2008 financial crisis and how the Brazilian banking (and prudential) regulation can be taken as responsible for this good performance. More specifically, the paper back to the middle of the 1990s, when the Real Plan was implemented, in order to understand the role played by the restructuring of the Brazilian financial system in helping to pave the way to the great resilience experienced by the Brazilian banking system during the 2008 crisis. More specifically, the prudential regulation that was implemented in Brazil in the aftermath of the Real Plan seems to play a decisive role in the resilience of the system nowadays.
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    Europe’s financial crisis: the Euro’s flawed design and the consequences of lack of a government banker
    (2012-03) Palley, Thomas I.
    This paper argues the euro zone requires a government banker that manages the bond market and helps finance country budget deficits. The euro solved Europe’s problem of exchange rate speculation by creating a unified currency managed by a single central bank, but in doing so it replaced the exchange rate speculation problem with bond market speculation. Remedying this requires a central bank that acts as government banker and maintains bond interest rates at sustainable levels. Because the euro is a monetary union, this must be done in a way that both avoids favoring individual countries and avoids creating incentives for irresponsible country fiscal policy that leads to 'bail-outs'. The paper argues this can be accomplished via a European Public Finance Authority (EPFA) that issues public debt which the European Central Bank (ECB) is allowed to trade. The debate over the euro’s financial architecture has significant political implications. The current neoliberal inspired architecture, which imposes a complete separation between the central bank and public finances, puts governments under continuous financial pressures. That will make it difficult to maintain the European social democratic welfare state. This gives a political reason for reforming the euro and creating an EPFA that supplements the economic case for reform.
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    A grande recessão: oportunidade para o Brasil alcançar os países desenvolvidos
    (2011) Nakano, Yoshiaki
    A crise financeira do subprime e o colapso do sistema financeiro, com a quebra do Lehman Brothers no terceiro trimestre de 2008, desencadeou um fenômeno com múltiplas dimensões e distinto da crise financeira em si, chamado Grande Recessão. Nesse cenário, as economias dos países centrais saem da normalidade e passam a ser regidas por comportamentos induzidos pela incerteza, medo, pânico etc., nos quais prevalece a lógica da desalavancagem, da balance sheet recession, da aversão ao risco e da demanda de ativos com sinais trocados, gerando instabilidades persistentes nesses mercados. Do ponto de vista político e social, o consenso desaparece e o sistema econômico, suas instituições e a ideologia que as justifica tornam-se disfuncionais, exigindo constante intervenção do Estado. O paradigma liberalizante que vigorava desde 1980 entra em crise e passa a ser questionado pelos fatos e pela crescente insatisfação da população. Como entender o que acontecerá com a economia global nesse contexto? Quais as consequências para o Brasil? A Grande Recessão representa uma ameaça ou uma oportunidade para nós? Neste texto, vamos utilizar paralelos históricos recorrendo a experiências similares, como a Grande Depressão de 1890 e a Grande Depressão de 1930. Com base nesses paralelos históricos, vamos fazer algumas conjecturas e levantar hipóteses sobre o que poderá acontecer nos próximos anos no Brasil.
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    Macroeconomic constraints to growth of Brazilian economy diagnosis and some policy proposals
    (2011-03) Oreiro, José Luis; Punzo, Lionello; Araújo, Eliane Cristina de; Squeff, Gabriel Coelho
    The recent process of accelerated expansion of the Brazilian economy was driven by exports and fixed capital formation. Although the pace of growth was more robust than in the 1990´s, we can still witness the existence of certain macroeconomic constraints to its continuation in the long run such as, for instance, the exchange rate overvaluation in particular since 2005, and in general the modus operandi of monetary policy. Such constraints may jeopardize the sustainability of the current pace of growth. Therefore, we argue that Brazil still lies in a trap made up of high interest and low exchange rates. The elimination of the exchange rate misalignment would bring about a great increase in the rate of interest, which on its turn would impact negatively upon investment and hence upon the sustainability of long run economic growth. We outline a set of policy measures to eliminate such a trap, in particular, the adoption of an implicit target for the exchange rate, capital controls and the abandonment of the present regime of inflation targeting. Recent events seem to go in this direction.
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    How to manage macroeconomic policies to foster growth and employment and prevent financial and external crises
    (2011-08-16) Frenkel, Roberto
    My presentation focuses on the implementation of a macroeconomic policy regime which, I believe, is capable of simultaneously attaining several targets, including the promotion of growth and employment and the prevention of external and financial crises.
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    A structuralist Philips curve
    (2011-10) Barbosa, Nelson
    This paper presents a structuralist model of the Philips curve and applies it to the US and Brazilian economies. The theoretical model starts from a simple markup rule to build a Philips curve based on the assumptions that firms have a desired rate of profit and wokers have a target real wage. Inflation expectations are modeled in terms of current inflation and the governments’ target, and the model shows that relative prices can have both a short-run and long-run influence on inflation. When applied to the US, the structuralist Philips curve results in a nonlinear model in which there are two steady states for inflation, and where the wageshare of income becomes the main instrument to drive inflation to the governments’ target. When applied to Brazil, the structuralist Philips curve reveals a nonlinear relationship between long-run inflation and the real exchange rate, so that the same inflation target can be consistent with more than one value of the exchange rate. The main conclusion of the paper is that a structuralist specification of the Philips curve is a useful instrument to model many macroeconomic topics as well as alternative theoretical closures.
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    How the full opening of the capital account to highly liquid financial markets led Latin America to two and a half cycles of ‘mania, panic and crash’
    (2011) Palma, José Gabriel
    Latin America has recently experienced three cycles of capital inflows, the first two ending in major financial crises. The first took place between 1973 and the 1982 ‘debt-crisis’. The second took place between the 1989 ‘Brady bonds’ agreement (and the beginning of the economic reforms and financial liberalisation that followed) and the Argentinian 2001/2002 crisis, and ended up with four major crises (as well as the 1997 one in East Asia) — Mexico (1994), Brazil (1999), and two in Argentina (1995 and 2001/2). Finally, the third inflow-cycle began in 2003 as soon as international financial markets felt reassured by the surprisingly neo-liberal orientation of President Lula’s government; this cycle intensified in 2004 with the beginning of a (purely speculative) commodity price-boom, and actually strengthened after a brief interlude following the 2008 global financial crash — and at the time of writing (mid-2011) this cycle is still unfolding, although already showing considerable signs of distress. The main aim of this paper is to analyse the financial crises resulting from this second cycle (both in LA and in East Asia) from the perspective of Keynesian/ Minskyian/ Kindlebergian financial economics. I will attempt to show that no matter how diversely these newly financially liberalised Developing Countries tried to deal with the absorption problem created by the subsequent surges of inflow (and they did follow different routes), they invariably ended up in a major crisis. As a result (and despite the insistence of mainstream analysis), these financial crises took place mostly due to factors that were intrinsic (or inherent) to the workings of over-liquid and under-regulated financial markets — and as such, they were both fully deserved and fairly predictable. Furthermore, these crises point not just to major market failures, but to a systemic market failure: evidence suggests that these crises were the spontaneous outcome of actions by utility-maximising agents, freely operating in friendly (light-touched) regulated, over-liquid financial markets. That is, these crises are clear examples that financial markets can be driven by buyers who take little notice of underlying values — investors have incentives to interpret information in a biased fashion in a systematic way. ‘Fat tails’ also occurred because under these circumstances there is a high likelihood of self-made disastrous events. In other words, markets are not always right — indeed, in the case of financial markets they can be seriously wrong as a whole. Also, as the recent collapse of ‘MF Global’ indicates, the capacity of ‘utility-maximising’ agents operating in unregulated and over-liquid financial market to learn from previous mistakes seems rather limited.
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    The revenge of the market on the rentiers why neo-liberal reports of the end of history turned out to be premature
    (2009-07) Palma, José Gabriel
    Starting from the perspective of heterodox Keynesian-Minskyian-Kindlebergian financial economics, this paper begins by highlighting a number of mechanisms that contributed to the current financial crisis. These include excess liquidity, income polarisation, conflicts between financial and productive capital, lack of intelligent regulation, asymmetric information, principal-agent dilemmas and bounded rationalities. However, the paper then proceeds to argue that perhaps more than ever the ‘macroeconomics’ that led to this crisis only makes analytical sense if examined within the framework of the political settlements and distributional outcomes in which it had operated. Taking the perspective of critical social theories the paper concludes that, ultimately, the current financial crisis is the outcome of something much more systemic, namely an attempt to use neo-liberalism (or, in US terms, neo-conservatism) as a new technology of power to help transform capitalism into a rentiers’ delight. And in particular, into a system without much ‘compulsion’ on big business; i.e., one that imposes only minimal pressures on big agents to engage in competitive struggles in the real economy (while inflicting exactly the opposite fate on workers and small firms). A key component in the effectiveness of this new technology of power was its ability to transform the state into a major facilitator of the ever-increasing rent-seeking practices of oligopolistic capital. The architects of this experiment include some capitalist groups (in particular rentiers from the financial sector as well as capitalists from the ‘mature’ and most polluting industries of the preceding techno-economic paradigm), some political groups, as well as intellectual networks with their allies – including most economists and the ‘new’ left. Although rentiers did succeed in their attempt to get rid of practically all fetters on their greed, in the end the crisis materialised when ‘markets’ took their inevitable revenge on the rentiers by calling their (blatant) bluff.
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    Why has productivity growth stagnated in most Latin American countries since the neo-liberal reforms?
    (2011) Palma, José Gabriel
    Latin America’s economic performance since the beginning of neo-liberal reforms has been poor; this not only contrasts with its own performance pre-1980, but also with what has happened in Asia since 1980. I shall argue that the weakness of the region’s new paradigm is rooted as much in its intrinsic flaws as in the particular way it has been implemented. Latin America’s economic reforms were undertaken primarily as a result of the perceived economic weaknesses of the region — i.e., there was an attitude of ‘throwing in the towel’ vis-à-vis the previous state-led import substituting industrialisation strategy, because most politicians and economists interpreted the 1982 debt crisis as conclusive evidence that it had led the region into a cul-de-sac. As Hirschman has argued, policymaking has a strong component of ‘path-dependency’; as a result, people often stick with policies after they have achieved their aims, and those policies have become counterproductive. This leads to such frustration and disappointment with existing policies and institutions that is not uncommon to experience a ‘rebound effect’. An extreme example of this phenomenon is post-1982 Latin America, where the core of the discourse of the economic reforms that followed ended up simply emphasising the need to reverse as many aspects of the previous development (and political) strategies as possible. This helps to explain the peculiar set of priorities, the rigidity and the messianic attitude with which the reforms were implemented in Latin America, as well as their poor outcome. Something very different happened in Asia, where economic reforms were often intended (rightly or wrongly) as a more targeted and pragmatic mechanism to overcome specific economic and financial constraints. Instead of implementing reforms as a mechanism to reverse existing industrialisation strategies, in Asia they were put into practice in order to continue and strengthen ambitious processes of industrialisation.
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    The economics of wage-led recovery: analysis and policy recommendations
    (2011-07) Palley, Thomas I.
    The financial crisis and Great Recession have been followed by a jobs shortage crisis that most forecasts predict will persist for years given current policies. This paper argues for a wage-led recovery and growth program which is the only way to remedy the deep causes of the crisis and escape the jobs crisis. Such a program is the polar opposite of the current policy orthodoxy, showing how much is at stake. Winning the argument for wage-led recovery will require winning the war of ideas about economics that has its roots going back to Keynes’ challenge of classical macroeconomics in the 1920s and 1930s. That will involve showing how the financial crisis and Great Recession were the ultimate result of three decades of neoliberal policy, which produced wage stagnation by severing the wage productivity growth link and made asset price inflation and debt the engine of demand growth in place of wages; showing how wage-led policy resolves the current problem of global demand shortage without pricing out labor; and developing a detailed set of policy proposals that flow from these understandings. The essence of a wage-led policy approach is to rebuild the link between wages and productivity growth, combined with expansionary macroeconomic policy that fills the current demand shortfall so as to push the economy on to a recovery path. Both sets of measures are necessary. Expansionary macro policy (i.e. fiscal stimulus and easy monetary policy) without rebuilding the wage mechanism will not produce sustainable recovery and may end in fiscal crisis. Rebuilding the wage mechanism without expansionary macro policy is likely to leave the economy stuck in the orbit of stagnation.
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    Brazil’s response to the international financial crisis: how did financial regulation and monetary policy influence the Brazil’s economic recovery?
    (2011) Ferrari Filho, Fernando
    In the beginning of the international financial crisis, the fact that the international crisis was restricted to the developed countries, and the emerging countries’ fiscal and external situation was comfortable, led a number of analysts and policymakers to give credence to the hypothesis of a ‘decoupling’ of emerging countries; that is, the notion that these economies would be able to sustain their dynamic performance and prove immune to contagion from the crisis. In 2008, moreover, the main concern among central banks, market analysts and multilateral organizations was with the inflationary pressures that emerging countries might suffer as a result of strongly rising food and oil prices.
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    Regulating the financial system in a Minskyian perspective
    (2012-03-23) Kregel, Jan
    Hyman Minsky argued that the basic role of the financial system was to support the capital development of the economy. By this he meant more than just the gross accumulation of the capital stock, but rather a broader interpretation of the advancement of the economy. He was clearly influenced by Schumpeter’s ideas as presented in the theory of economic development, although he never adopted the approach of Walrasian equilibrium. Instead he developed an explanation of more or less sustained capitalist expansion interrupted by periodic crises in which the production interdependencies and financing arrangements and conventions would break down, leaving in their place conditions for renewed expansion. In such a system equilibrium would not be maintained by market-based price adjustment, but a new configuration of productive and financial relations would replace the old.
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    Structured derivatives contracts, hedging exchange appreciation and financial instability: Brail, China and Korea
    (2011) Kregel, Jan
    There has been a great deal of discussion recently over the use of exchange rates to ameliorate international imbalances. At the same time many developed countries have embarked a highly expansionary monetary policies, expanding the types and amounts of securities held on central bank balance sheets and attempting to use these purchased to alter the shape of the yield curve by buying medium and longer term securities. These two policies are inter‐related since effective monetary expansion and zero short term interest rates accompanied by extremely low medium term interest encourage interest rate arbitrage and a reach for yield amongst institutional and retail investors which tends to increase exchange rate volatility and produce unidirectional cumulative movements of exchange rates in surplus countries which may cause substantial financial instability in the countries whose currencies are under pressure to appreciate.  
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    How to manage a sustainable and stable competitive real exchange rate
    (2012-03-23) Frenkel, Roberto
    The paper is presented in four sections. Following this Introduction, Section 1 discusses the stability and sustainability of the CRER target. The conclusions of this section provide the framework for the analysis of the appropriate macroeconomic policies in the following sections. The paper focuses mainly on exchange-rate and monetary policies, presented in sections 2 and 3. The analysis points out the crucial importance of fiscal policy in the implementation of a CRER, but we not develop a detailed analysis of fiscal policy in this paper. Conclusions are presented in section 4, which include a set of guidelines of a macroeconomic policy regime, which includes a CRER target.
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    Exchange rate management techniques
    (2011) Prates, Daniela Magalhães
    This briefing note addresses the question: What revisions of financial regulation and financial governance in Brazil are necessary to support Brazilian development? What’s in place and what’s missing? The focus here is a dimension of financial regulation and governance: the regulation of capital flows and of exchange rate operations. The arguments are organized in the following manner. In the next section, we summarize the impacts of th crisis on the emerging-market economies and on the regulation of the international monetary and financial system. The third section discusses the post-crisis dilemmas faced by these economies. Finally, the fourth section presents some policy recommendations for Brazil.