Brazilian Journal of Political Economy

The nature of Central Bank Independence: historical background and rise in the era of financialization

Rodrigo Siqueira Rodriguez

This article brings back the debate on central bank independence from its historical
origins and its relation to financialization. With financial dominance, States have less influence
over central bank policies as they gain greater action capacity through monetary policy
strengthening. Central bank independence is an expression of financialization as it makes
the monetary authority more susceptible to financial market pressures and simultaneously
limits the participation of the State and society in conducting monetary policy.

JEL Classification: E58; B26.

The International North-South Transport Corridor (INSTC) and India: potential and impediments

Lakshman Chandra Pal

O corredor modelo que se estende de Mumbai (Índia) a São Petersburgo (Rússia),
passando pelo Irã e pelo Azerbaijão, é conhecido como Corredor Internacional de Transporte
Norte-Sul (INSTC). Esse corredor multimodal tem cerca de 7.200 km de extensão e é
composto por ferrovias, rodovias e hidrovias. O principal objetivo da construção do corredor
é melhorar a conectividade e as relações comerciais entre o Norte e o Sul. Desempenhará
um papel crucial na promoção da cooperação regional e da integração econômica. As relações
bilaterais entre os países-membros serão desenvolvidas através do projeto. A Índia
terá acesso fácil às nações ricas em recursos da Ásia Central através deste corredor, contornando
o Paquistão. Ajudará a Índia, exportando os seus produtos para os países do Norte
e Centro da Ásia, incluindo a Rússia, e importando hidrocarbonetos a um custo mais baixo,
evitando a rota tradicional de longa data. Na atual situação geopolítica, este empreendimento
também melhorará as relações estratégicas da Índia com os países-membros. Embora
o projeto esteja atualmente sofrendo de algumas falhas, será um fator de mudança para
a política da Índia para a Eurásia num futuro próximo.

JEL Classification: F02.

Francisco Dornelles’ brief tenure at the Ministry of Finance: The decline of FGV-RJ and the Delfim Boys’ dominance in shaping Brazil’s economic policy

Alexandre F. S. Andrada

This article analyzes Francisco Dornelles’ term at the Ministry of Finance in
1985. In addition to filling the existing gap in historiography, it reconstructs the thinking and
economic actions of Dornelles and Tancredo Neves. Both were conservatives, endorsing a
“monetarist” diagnosis of the Brazilian crisis. This conservatism translated into a relative
continuation of the austerity policy implemented by Delfim Netto. It is argued that Dornelles’
departure from the Ministry of Finance marks an important turning point in Brazil’s economic
history. FGV-RJ and the “delfinist” faction of FEA-USP lose their hegemony over economic
policy, creating space for other schools, such as Unicamp and PUC-Rio.

JEL Classification: B20; N16; N46.

Internationalization of Brazilian companies: the rise and fall of a state policy

Robson Coelho Cardoch Valdez

The aim of this work is to analyze the rise of the Brazilian exports and foreign
investment support policy during the Lula and Dilma governments (2003-2016) and its fall
as a state policy in the Temer (2016-2018) and Bolsonaro (2019-2022) governments. In the
first part, we present the theoretical and methodological approaches used to understand the
internationalization of companies within the scope of Brazilian foreign policy between 2003
and 2016. In the second, we demonstrate the main instruments of state support for the internationalization
of national companies in this period. In the third, we selected elements of
Brazilian foreign policy for Africa and Latin America as an interface for the insertion of national
companies in these markets. Finally, we analyze how elements of the economic and political
situation help to understand the fall of state support for the internationalization of national
companies in the Temer and Bolsonaro governments, such as the replacement of the Long-Term Interest Rate (TJLP) by the Long-Term Interest Rate (TLP) in the new BNDES
contracts.

JEL Classification: F5; F15; F21.

Industrial policy in Brazil: empirical evidence in a context of structural changes (2007-2020)

Luís Felipe Giesteira

This work performs a comparative analysis of the economic and technological
dynamism of industrial sectors in Brazil during the period 2007-2020. It aims to identify correspondences
between these result variables and the practice of industrial policy in industrial
sectors. The results suggest feeble coordination among the use of instruments, that most
of the sectors did not differ from the general patterns of the manufacturing industry, that exceptional
performances are not related to the diversity of instruments, but that the sectors of greater technological intensity seem to have responded particularly well to the combination
of BNDES and FINEP funding and use of public purchasing power.

JEL Classification: L52.

Critical rationalism and institutional change in Hayek

Eduardo Angeli

The institutional analysis promoted by F. A. Hayek seeks to understand how human
action and coordination among individuals occur in an environment where the knowledge
held by each person is incomplete and not fully transmittable. In such an environment,
the institutional framework plays an important role in conditioning, at least partially, the behavior
of members within a spontaneously emerging social order. In light of this, the objective
of this article is to present Hayek’s evolutionary institutional approach by organizing the
discussion proposed by the Austrian economist on the subject. To do so, it will discuss
Hayek’s distinction between critical rationalism and constructivist rationalism. It will also
address Hayek’s explanation of institutional change and delve into his evolutionary approach
to the social sciences, as opposed to the natural sciences.

JEL Classification: B25; B31; B53.

Fiscal policy transmission mechanisms

Manoel Carlos Pires

The effect of fiscal policy over business cycles has been a source of major controversy
despite the growing empirical literature and international experience. This paper proposes
an analytical framework that allows us to analyze the transmission channels of fiscal
policy, updating the most recent findings after the pandemic. In this way, it aims to contribute
to a more detailed understanding of some of the main mechanisms by which fiscal policy
affects the economy.

JEL Classification: E32; E63; H62.

Industrialization and deindustrialization: an empirical analysis of some drivers of structural change in Brazil, 1947-2021

Hugo C. Iasco-Pereira

This article investigates the causes of structural change in Brazil, through the rise
and the fall of the manufacturing industry, and the consequences for total factor productivity
and manufacturing labour productivity, from 1947 to 2021. Our results show that the industrialization
of the Brazilian productive structure is positively associated with expansions
in infrastructure investments and with the pursuit of a competitive real exchange rate, that
is, with policies oriented towards economic development. Our findings also indicate that
such variables exert a direct influence on total factor productivity and manufacturing labour productivity and an indirect influence through their impacts on the Brazilian productive
structure. Our conclusions suggest that an important cause of the Brazilian premature deindustrialization,
and then of its poor performance in terms of total factor productivity and
manufacturing labour productivity, is the adoption of policies not oriented towards economic
development adopted since the neoliberal reforms of the 1980s and 1990s.

JEL Classification: O1; O11; O14.

Commodity dependence, structural reforms, and commodity trap: South America 1970-2017

Fernando Isabella

Commodity dependence is a long-lasting feature of South American economies,
with far reaching effects in economic and social performance. This paper focuses in the interaction
between commodity prices and real exchange rate and in its effects on productive capabilities.
New-Developmentalist approach has labeled that situation as a “Dutch-Disease”. I
propose a Balance of Payment Constraint Growth model especially designed to address some
specificities of commodity dependence that allow to theoretically analyze this issue. Empirical
tests are conducted for the period 1970-2017. It is found that price surges are damaging for
productive capabilities only in the context of the dismantling of state intervention.

JEL Classification: C23; E12; 011.

The international monetary and financial system and the digital revolution: perspectives for emerging and developing countries

Luiza Peruffo

This article investigates the impacts of the digital revolution on the international
monetary and financial system (IMFS), emphasizing the effects generated by the new China’s digital currency, e-CNY. It is argued that from the point of view of emerging and developing
countries (EDCs) the transformations of the digital age imply considering costs and benefits
of implementing central bank digital currencies (CBDCs), in a context where this “new form”
does not substantially change the hierarchical and asymmetric character of the SMFI. The e-
CNY implies the establishment of new disjunctures, such as, for example, developing systems
that are interoperable with the Chinese system, or not. This aspect carries a strong political
component in the current context of questioning the status quo in various dimensions
of the international system. To illustrate this aspect, the article brings empirical evidence on
the evolution of the interconnections between the Chinese economy and the main EDCs in
dimensions such as convergence in business cycles and financial cycles. Greater integration
with China could work as a potential attraction factor for many EDCs, which could gravitate
more towards e-CNY in a scenario of greater opposition to the US dollar dominance.

JEL Classification: F33; F50; F44.