Financial liberalization and structural change: the Brazilian case in the 2000s

Feijo, Carmem; Lamônica, Marcos Tostes; Lima, Serigiano Silva

doi:10.1590/1982-3533.2019v28n1art09

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Original articles • Econ. soc. 28 (1) • Jan-Apr 2019 • https://doi.org/10.1590/1982-3533.2019v28n1art09 copy

Financial liberalization and structural change: the Brazilian case in the 2000s^* * The authors wish to thank an anonymous reviewer for helpful comments. All remaining errors are the authors’ responsibility.

Liberalização financeira e mudança estrutural: o caso brasileiro nos anos 2000

Authorship SCIMAGO INSTITUTIONS RANKINGS

Abstract

This paper discusses the relationship between financial integration and structural change based on a Minsky-Kregel approach. The motivation for this investigation derives from the fact that the opening of the Brazilian economy in the 1990s did not generate a structural change capable of increasing the weight of higher-technological sectors in the manufacturing industry. In theoretical terms we assume that financial liberalization in developing countries induces the loss in importance of the industrial sector in the productive structure, leading to an early deindustrialization process. In addition, it increases the external fragility and reduces the scope for developing countries to implement long-term economic policies to increase their potential output. In our econometric exercise applied to the Brazilian economy in the 2000s it was observed that financial integration and dependence on foreign savings, captured by an international liquidity proxy and dummy variables to incorporate the external financial instability in the period studied, reduced the share of Brazilian industry in GDP.

Key words:
Financial liberalization; Policy space; Brazilian economy

	GDP	Private Consumption	Government Consumption	Gross Capital Formation	Exports	Imports
1996-1999	1.6	1.5	1.1	0.0	5.2	0.7
2000-2008	3.8	3.5	2.6	4.5	8.3	7.6
2009-2016	1.2	2.1	1.5	-0.6	1.8	1.1
1996-2016	2.4	2.6	1.9	1.7	5.2	3.8

Manufacturing Products	2000-2004	2005-2010	2011-2014	2000-2014
Natural Resource Based	15 116.0	44 026.0	74 165.1	42 426.4
Labor-Intensive	3 434.3	2 747.9	-2 762.6	1 507.2
Scale-Intensive	630.0	-6 256.0	-45 293.7	-14 370.7
Science, Engineering and Knowledge Based	-8 008.2	-20 541.6	-43 439.6	-22 469.9
Subtotal	11 172.0	19 976.3	-17 330.8	7 093.0
Agricultural Products, Fishery and Forestry Products	4 283.2	12 172.2	28 533.8	13 905.6
Non-Classified	-681.5	1485.9	681.6	549.0
Total	14 773.7	33 634.4	11 884.7	21 547.6

Variable	MODEL
Variable	1	2	3	4
g_{(IND/GDP)t-ϵ}	0.2059^ significant at 5 percent; Model 4 showed the best adjustment. (2.6279)	0.1840^ significant at 5 percent; Model 4 showed the best adjustment. (2.4682)	0.1731^ significant at 5 percent; Model 4 showed the best adjustment. (2.4043)	0.1870^ significant at 5 percent; Model 4 showed the best adjustment. (2.5794)
∆l_t-1	-0.0191 (-0.3723)	0.0676 (1.1064)	0.0808 (1.4553)	0.0679 (1.2134)
B∆l_t-1		-0.0863^* ***** significant at 1 percent; (-5.5984)	-0.0879^* ***** significant at 1 percent; (-5.0949)	-0.0885^* ***** significant at 1 percent; (-4.7352)
Cf_t			-0.0280^* ***** significant at 1 percent; (-16.721)	-0.0285^* ***** significant at 1 percent; (-16.365)
C_t				-0.0108^* ***** significant at 1 percent; (-3.6265)
Constant	-0.0017 (-0.9868)	-0.0016 (-0.9128)	-0.0007 (-0.4689)	0.0001 (0.0478)
R-squared	0.0437	.1012	0.2425	0.2822
Adjusted R-squared	0.0108	0.0539	0.1884	0.2170
Durbin-Watson stat	2.0024	1.9850	2.1977	2.2902
Jarque-Bera Prob	0.6182	0.7324	0.8133	0.8704
White Test Prob	0.3264	0.5757	0.8717	0.9420
Breusch-Godfrey Prob	0.7130	0.9821	0.7518	0.5436
F-statistic	1.3261	2.1392	4.4819	4.3250
Prob(F-statistic)	0.2734	0.1053	0.0033	0.0022

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Financial liberalization and structural change: the Brazilian case in the 2000s* * The authors wish to thank an anonymous reviewer for helpful comments. All remaining errors are the authors’ responsibility.

Liberalização financeira e mudança estrutural: o caso brasileiro nos anos 2000

Abstract

Financial liberalization and structural change: the Brazilian case in the 2000s^* * The authors wish to thank an anonymous reviewer for helpful comments. All remaining errors are the authors’ responsibility.