The paper aims to shed light on the theory of demand-led growth in Latin America, thus providing evidence for the Brazilian economy. This being said, the authors introduce econometric evidence to corroborate the hypothesis that the Brazilian economy is based on demand-driven growth. Consequently, the paper suggests that the real GDP growth during 1990-2005 is explained by variables related to demand, particularly exports and public consumption. To evaluate these approaches, the authors introduce the methodology developed by Atesoglu (2002).
The document is organized as follows. After a brief introduction, the second section describes the theory of demand-led growth, whilst chapter three describes the methodology developed by Atesoglu (2002) and introduced by the authors in the investigation. Section four provides an empirical analysis of the relationship between real exchange rate and Brazil’s income elasticity of exports, whereas chapter five offers some concluding arguments on the subject.
In conclusion, the authors argue that their findings suggest that almost 85% of Brazil’s real GDP growth during 1990-2005 is explained by variables related to demand, particularly exports and public consumption. Subsequently, due to the current fiscal crisis undergone by Brazil, the only option to boost the country's GDP growth is to adopt a model of export-led growth.