Conjuncture Note from the Center for Economic Conjuncture and Policy Studies (Cecon) on the Brazilian economic crisis based on a comparison of the crisis that began in 2015 with others of great magnitude, such as those of the 1930s, 1980s and 1990s.
The Center for Economic Studies and Economic Policy at the Unicamp Institute of Economics (Cecon) began publishing a series of economic notes in May. The first note, “Recessive shock and the biggest crisis in history: The Brazilian economy in reverse”, written by professors Pedro Rossi and Guilherme Mello, discusses the causes of the current Brazilian economic crisis and provides a diagnosis according to which a “recessive shock” in 2015 was its main explanatory factor.
According to the note, this shock was composed of: i) a fiscal shock (with the fall in public expenditure in real terms), ii) a shock in administered prices (especially fuel and energy), iii) an exchange rate shock (with devaluation of 50% of the Brazilian currency in relation to the dollar throughout 2015), and iv) a monetary shock, with an increase in interest rates for credit operations.
Also from 2015 onwards, there was a profound change in the job market, with a rapid increase in the unemployment rate. Furthermore, there is an important change in the dynamics of aggregate demand components. In 2014, the demand variable driving the slowdown was investment, while household consumption continues to contribute positively to GDP.
The publication considers that in 2016, with the change of government, there was also a change in the economic strategy, which began to favor liberalizing structural reforms to the detriment of short-term adjustments.
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