The political economy of monetary policy in Dilma Roussef’s government´s: an analysis of interest rates, convention and rent-seeking in Brazil

Abstract

This article seeks to understand, through an analysis of the political economy, the limitations of Dilma Rousseff’s government’s monetary policy, with an emphasis on the trajectory of interest rates. Based on the convention thesis (in the Keynesian sense) and focusing on the concepts of financial dominance and rent seeking of the (post) Keynesian political economy, it is argued that there was an attempt to reduce the interest rate (nominal and real) below a level conventionally accepted by the population. From there, the sectors concerned with the maintenance of the convention, specifically the rent seeking financial sector, began to organize themselves in disfavor of economic policy as a whole. It is also argued that a short-term vicious circle in the Brazilian economy formed, in which the reaction of these opposition sectors resulted in deepening economic and political crisis, which, in turn, improved the performance of these sectors.