The tale of the contagion of two crises and policy responses in Brazil: a case of (Keynesian) policy coordination?

This paper aims to assess the reasons for the economic slowdown in Brazil after 2010. In particular, it contributes to a better understanding of why Brazil’s countercyclical policies succeeded in handling the contagion resulting from the Lehman Brothers crisis but did not manage the contagion caused by the euro crisis. The paper examines what we understand by Keynesian policies and the importance of policy coordination and then evaluates the extent to which Brazil used coordinated economic policies in the face of both crises. The main hypothesis of the paper is that the difference in the performance of the countercyclical policies in both crises is related mainly to Brazil’s lack of coordination of macroeconomic policies in 2011–12, especially the implementation of fiscal policy.