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The financial crisis has started in the U.S. mortgage market, took broader proportions and settle... more The financial crisis has started in the U.S. mortgage market, took broader proportions and settled in as an international financial crisis. The crisis reached the Brazilian economy by the end of 2008, in a moment of high economic growth, not seen since the 1970s. This economic growth was characterized by a very strong credit expansion. In the last quarter of 2008, after the bankruptcy of Lehman Brothers (Sept. 2008), there was an important rise in uncertainty all over the world, including Brazil. This high level of uncertainty raised also the liquidity preference, leading to a sudden disruption of the private credit market. Among other determinants, the credit crunch caused a significant drop of GDP in early 2009. In response to that situation, the Brazilian policy makers organized a whole set of policies to deal with the crisis. Two main pillars of these policies were the Central Bank action of providing liquidity to banks and the public banks decision of increasing the supply of credit. The result was a resumption of GDP growth in the first half of 2009. The aim of this paper is to discuss the policies adopted by the Brazilian government to face the crisis in 2008 and 2009 under the Minskyan perspective of Big Bank.
The financial crisis has started in the U.S. mortgage market, took broader proportions and settle... more The financial crisis has started in the U.S. mortgage market, took broader proportions and settled in as an international financial crisis. The crisis reached the Brazilian economy by the end of 2008, in a moment of high economic growth, not seen since the 1970s. This economic growth was characterized by a very strong credit expansion. In the last quarter of 2008, after the bankruptcy of Lehman Brothers (Sept. 2008), there was an important rise in uncertainty all over the world, including Brazil. This high level of uncertainty raised also the liquidity preference, leading to a sudden disruption of the private credit market. Among other determinants, the credit crunch caused a significant drop of GDP in early 2009. In response to that situation, the Brazilian policy makers organized a whole set of policies to deal with the crisis. Two main pillars of these policies were the Central Bank action of providing liquidity to banks and the public banks decision of increasing the supply of credit. The result was a resumption of GDP growth in the first half of 2009. The aim of this paper is to discuss the policies adopted by the Brazilian government to face the crisis in 2008 and 2009 under the Minskyan perspective of Big Bank.