Banking Behaviour and the Brazilian Economy After the Real Plan: a Post-Keynesian Approach*

Abstract: This paper aims at analysing – from a Post Keynesian approach- the Brazilian banking behaviour in the current phase of the business cycle that is at the semi-stagnation state of the economy. According to the Post Keynesian approach, banks are economic agents that have liquidity preference determined strongly by their expectations under uncertainty, managing their portfolio according to the trade-off between liquidity and profitability. We argue that banking behaviour in Brazil has been determined by the specific institutional-macroeconomic context of the current phase of the Brazilian economy, with banks taking advantage of the high rates of interest and the conditions in which government has managed its internal debt. But at the same time banking strategies are determinant of the current phase since portfolio allocation has been dominated by a short-termist behaviour and high liquidity preference that have resulted in low credit supply and high banking spread