August 2015, Franklin Serrano and Ricardo Summa

This paper examines the sharp slowdown in the Brazilian economy for the years 2011-2014, in which economic growth averaged only 2.1 percent annually, as compared with 4.4 percent in the 2004-2010 period. The authors argue that the slowdown overwhelmingly results from a sharp decline in domestic demand led by government policy, rather than from a fall in exports and even less from any change in external financial conditions. It concludes that this decision to slow the economy was not necessary as there was no external constraint, such as a balance-of-payments problem, that warranted it.

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