Economic growth and pollution in Brazil: a post-Kaleckian approach

This study empirically examines the economic and environmental factors affecting investment dynamics in Brazil from 1990 to 2021. Using data from IPEADATA, IBGE, and SEEG, we analyze key indicators including investment, capacity utilization, profit share, and CO2 emissions. Unit root tests indicate the series are integrated of order one, supporting the use of a five-lag Vector Autoregression (VAR) model after confirming stationarity in first differences. While the VAR residuals are non-normal, homoscedasticity and structural stability validate dynamic inferences. Impulse response analysis shows that positive shocks to profit share have a lagged, transitory effect on investment, reflecting structural constraints and climate-related financial risks. CO2 emission shocks initially reduce investment, followed by recovery, highlighting sectoral adjustments and regulatory uncertainty. Capacity utilization shocks provoke an immediate investment increase, followed by oscillations, indicating intertemporal adjustments and financial frictions. These findings reveal the intricate interplay between economic performance and environmental pressures, emphasizing the importance of public policies that combine profitability incentives with coordinated green investments. The research contributes to understanding investment behavior under environmental constraints, offering insights aligned with Post-Kaleckian perspectives and the transition to a low-carbon economy.