Credibility and populism: The economic policy of the Goulart administrations in Brazil

Abstract

The Goulart Administrations (1961-1964), which consisted of a parliamentary period and a presidential period, are considered typical examples of populism in Brazil. The literature usually defines economic policies advanced by these administrations as "hesitating", "irrational" or "ambiguous." We use a credibility model to argue that there is actually a consistent pattern in the manner in which economic policy was conducted. The credibility of the economic policies is defined to be the subjective probability that the government is following a monetary rule. Early on, the administrations enacted inflation-fighting measures. However, these policies were costly, and the administrations abandoned the course of austerity. As a result, their credibility was diminished, and attempts to achieve stabilization failed.