Capital Markets in the Development Process: The Case of Brazil

343 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1988.Financial growth has been viewed as a sine qua non for stable economic growth (see especially McKinnon, 1987, and Shaw, 1972). Since 1964, Brazilian policy makers have actively promoted financial market growth not only through the more traditional interest rate liberalization scheme (indexing) but also through the creation of institutions which did not exist and restructuring those which did not function in an efficient way.This thesis traces the evolution of the Brazilian financial system before and after the 1964-1966 reforms and evaluates its role in economic growth and stability. It concentrates on describing the policy makers' original objectives of the reforms, the means by which these objectives were to be achieved, the financial system which resulted, and the inconsistencies which developed between 1964 and 1986. The analysis is undertaken with heavy reliance on statistical analysis where possible tempered by a thorough discussion of the financial market institutional framework.The main objective of the work is to examine the post-reform path of the Brazilian financial sector to its present structure and outline the ingredients for a successful reform. The Brazilian financial sector is now very strong but not necessarily efficient. It is one with a propensity for excessive credit creation due to its institutional structure and the political power of those who use and supply credit.The main conclusion of the study is that Brazil's experience with financial market development was successful and worthwhile, This favorable conclusion, however, is of a highly qualified nature. Although its strong financial market did help Brazil avoid the large capital flight experienced by its neighbors in the Southern Cone, the working relationships which were established over this period have become significant barriers to the achievement of economic growth and stability.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD