Sustainability of Brazilian fiscal policy, once again: corrective policy response over time
DOI:
https://doi.org/10.1590/0101-4161201545247vilKeywords:
função de reação fiscal, sustentabilidade fiscal, BrasilAbstract
This paper estimates a fiscal reaction function for Brazil and investigates how the
government´s fiscal reaction has changed over time when controlling for cyclical variations
in output and the relative participation of indexed debt. Using monthly data
since 1991, we estimate a rolling reaction function with a one observation step and a
sample-window of 12 observations. Our results indicate that the government´s fiscal
response has been such that a one percent increase in the debt-GDP ratio can be associated
to an average increase in the primary surplus of approximately 0.096% over GDP
or 9.6 basis points; the government´s fiscal reaction has become more stable but less
responsive to the debt-income level after 2000 and assumed a declining trend after 2006.
Downloads
References
constraints satisfied in long-term data? Journal of Monetary Economics 36:351-374.
BANERJEE, A., DOLADO, J.J., GALBRAITH, J.W. AND HENDRY, D.F. (1993):Co-integration, Error
Correction, and the Econometric Analysis of Non-Stationary Data. Oxford: Oxford University Press.
BICALHO, A. (2005). Teste de sustentabilidade e ajuste fiscal no Brasil Pós-Real. Master Thesis,
EPGE/FGV, Rio de Janeiro.
BOHN, H. (1998). The behavior of U.S. public debt and deficits. The Quarterly Journal of Economics
113(3).
BOHN, H. (2005).The sustainability of fiscal policy in the United States, CESifo Working Paper
Series 1446, CESifo Group Munich.
BOHN, H. (2007). Are stationarity and cointegration restrictions really necessary for the intertemporal
budget constraint?. Journal of Monetary Economics 54: 1837-1847.
DE MELLO, L. (2005). Estimating a fiscal reaction function: the case of debt sustainability in Brazil.
OECD Economics Department Working Papers, n. 423.
GARCIA and RIGOBON (2004). A risk management approach to emerging market´s sovereign debt
sustainability with an application to Brazilian data. NBER Working Papers 10336, National
Bureau of Economic Research.
GIAMBIAGI, F. and M. RONCI (2004): Fiscal Policy and Debt Sustainability: Cardoso’s Brazil, 1995-
2002, IMF Working Paper WP/04/156, Washington, D.C.
HAKKIO, C. & RUSH M. (1991). Is the budget deficit ‘too large’? Economic Inquiry 39 (July):429-445.
HAMILTON, J. (1994). Time Series Analysis. Princeton: Princeton University Press.
HAMILTON, J. & FLAVIN, M. (1986). On the limitations of government borrowing: a framework for
empirical testing. The American Economic Review 76(4):809-19.
HAYASHI, F. (2000). Econometrics. Princeton: Princeton University Press.
ISSLER, J. V. AND LIMA, L. R. (2000). “Public Debt Sustainability and Endogenous Seigniorage in Brazil:
Time Series Evidence from 1947-1992”. Journal of Development Economics, v.62, 131-147.
JOHANSEN, S. (1991). “Estimation and hypothesis testing of cointegrated vectors in Gaussian VAR
models.” Econometrica, 59 (6): 1551-1580.
LIMA, L. R. and SIMONASSI, A. G. (2005). “Dinâmica não-linear e sustentabilidade da dívida pública
brasileira”. Pesquisa e Planejamento Econômico, v. 35(2).
LUPORINI, V. (2000). “Sustainability of the Brazilian fiscal policy and central bank independence”.
Revista Brasileira de Economia, v.54(2).
LUPORINI, V. (2002). "The behavior of the Brazilian federal domestic debt". Revista de Economia Aplicada,
6:713–733.
LUPORINI, V. and A. LICHA (2009). “Espacio fiscal para el crecimiento em Brasil”, in J. Fanelli (org.)
Espacio Fiscal para el crecimiento el Mercosur. Red Mercosur de Investigaciones Económicas,
Zonalibro, Uruguay.
MENDONÇA, M., C. SANTOS and A. SACHSIDA (2009). Revisitando a função de reação fiscal no
Brasil pós-Real: uma abordagem de mudanças de regime. Estudos Econômicos vol. 39(4): 873-894.
MENDOZA, E. and P. OVIEDO (2004). “Public debt, fiscal solvency and macroeconomic uncertainty
in Latin American: the case of Brazil, Colombia, Costa Rica and Mexico.” NBER, Working
Paper 10637.
ROCHA, F. (1995). Monetary regimes and macroeconomic policy: an empirical analysis of the Brazilian
economy. PhD Dissertation, University of Illinois at Urbana-Champaign.
SIMONASSI, A. (2013). Reação fiscal sob mudanças estruturais e a solvência da economia brasileira.
Mimeo, CAEN/UFC.
SIMS, Christopher A., JAMES H. Stock, and Mark W. WATSON. 1990. Inference in Linear Time Series
Models with Some Unit Roots. Econometrica 58 (1): 161–82.
TANNER, E. (1995). Intertemporal solvency and indexed debt: evidence from Brazil, 1976-1991.
Journal of International Money and Finance, 14 (4): 549-73.
TANNER, E. and I. SAMAKE (2008). “Probabilistic sustainability of public debt: a vector autoregression
approach for Brazil, Mexico, and Turkey” IMF Staff Papers, vol. 55 n. 1.
TREHAN, B. & WALSH, C. (1991). Testing intertemporal budget constraints: theory and applications
to U.S. federal budget and current account deficits. Journal of Money, Credit, and Banking
23(2):206-23.
UCTUM, M. and M. WICKENS (2000). “Debt and deficit ceilings, and the sustainability of fiscal policies:
an intertemporal analysis.” Oxford Bulletin of Economics and Statistics, 62(2).
UCTUM, M., T. THURSTON and R. UCTUM (2006). “Public debt, the unit rood hypothesis and
structural breaks: a multi-country analysis”. Economica 73: 129-156.
WILCOX, D. (1989). The sustainability of government deficits: implications of the present-value
borrowing constraint. Journal of Money, Credit, and Banking 21(3):291-306.
Downloads
Published
Issue
Section
License
Copyright (c) 2015 Viviane Luporini
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
By submitting an article, the author authorizes its publication and attests that it has not been submitted to any other journal. The original article is considered final. Articles selected for publication are proofread for grammatical and orthographic errors. The journal does not pay rights for published articles. The Institute of Economic Research from the School of Economics, Business and Accounting of the University of São Paulo (Instituto de Pesquisas Econômicas da Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo) owns the journal's copyright.
