Archives

  • 2018-07
  • 2018-10
  • 2018-11
  • 2019-04
  • 2019-05
  • 2019-06
  • 2019-07
  • 2019-08
  • 2019-09
  • 2019-10
  • 2019-11
  • 2019-12
  • 2020-01
  • 2020-02
  • 2020-03
  • 2020-04
  • 2020-05
  • 2020-06
  • 2020-07
  • 2020-08
  • 2020-09
  • 2020-10
  • 2020-11
  • 2020-12
  • 2021-01
  • 2021-02
  • 2021-03
  • 2021-04
  • 2021-05
  • 2021-06
  • 2021-07
  • 2021-08
  • 2021-09
  • 2021-10
  • 2021-11
  • 2021-12
  • 2022-01
  • 2022-02
  • 2022-03
  • 2022-04
  • 2022-05
  • 2022-06
  • 2022-07
  • 2022-08
  • 2022-09
  • 2022-10
  • 2022-11
  • 2022-12
  • 2023-01
  • 2023-02
  • 2023-03
  • 2023-04
  • 2023-05
  • 2023-06
  • 2023-07
  • 2023-08
  • 2023-09
  • 2023-10
  • 2023-11
  • 2023-12
  • 2024-01
  • 2024-02
  • 2024-03
  • 2024-04

    • Based upon the proposals of Bai a b

    2018-11-13

    Based upon the proposals of Bai (1997a,b) and Bai and Perron (1998), it is aim to investigate whether the accumulation of public debt implies more restrictive policies by the Brazilian government. In the Barro\'s (1979) model, also applied by Rocha (1997) and Luporini (2000), the sustainability condition is supported by the positive response of the primary superavit to the debt, while Bai\'s (1997a,b) technique enables the estimation of a fiscal response function with multiple structural breaks in the estimated parameters for the intercept and the response of the primary surplus to the debt. Similarly, we estimate a reaction function for Brazil by considering the structural breaking points as random variables. In so doing, the political response of the Government to the accumulation of debt is supposed to be analyzed properly, even in periods of structural changes in fiscal policy or in subsamples defined endogenously by the criteria described above.
    Concluding remarks The methodological approach follows Bohn (2006), who deals with the strategy of investigating the response from the Government for generating primary surplus facing the public debt accumulation. This methodological choice provides more robustness to analyze the sustainability of the fiscal policy of a country. Monthly data of the stock of pubic net debt and flows of revenues and expenditures were fit in a reaction function for Brazil in the YO-01027 manufacturer December 1991/December 2008. Tests for the occurrence of endogenous structural breaks are based upon Bai and Perron (1998). The advantage of this approach over earlier proposals, such as Luporini (1999, 2000, 2012) who also shows that the Brazilian public debt is sustainable, is not to impose a priori the date at which the structural change occurs. Structural breaks must be treated as random variables. The results here found go beyond those of Lima and Simonassi (2005), who also confirm the sustainability of public debt in Brazil in the period 1947–1999, since we allow the possibility for more than one structural break in the estimated parameters. Moreover, an additional advantage of this methodology is to identify whether a fiscal austerity policy is active in periods that the public debt eventually grows. The empirical results turned out two structural changes in the Brazilian fiscal policy, one in May-1994 and another in February-2003. These findings are consistent with Giambiagi (2004) who argues that it was expected the ten-year cycle of increases in public debt/GDP to terminate in 2004. Nevertheless, the first break occurs during a period marked by two laws of debt renegotiation and several restrictions on indebtedness imposed to state and municipal governments, and the second break occurs in a scenario of exchange devaluation crises of severe uncertainty about the future of the Brazilian economy, in spite of its increasing economic growth rate. Although the Brazilian fiscal policy had shown to be sustainable over the sampled time series, only from May 1994, to hitherto innocuous responsiveness of the public sector to increases in public debt, it becomes effective. This improvement in the fiscal balance of the government is linked to the relative irrelevance of the use of seigniorage as a source of finance funding. These results support the arguments of Goldfajn (2002) who predicted that the sustainability of the Brazilian public debt started in 1998, in spite of the adverse scenarios of economic growth and interest rate. The solidness of the Brazilian economy to potential impacts of the financial international crises is also testified in the results. Despite the application of a distinguished methodology that treats structural changes endogenously, the general meaning of the estimates here obtained resemble those of other authors such as Luporini (2011, 2012). It could also be established from the estimate magnitudes that the government response to hinder the progress of the Brazilian public more than doubled, as indeed occurs in the last eight years of the sampled time series. This fact reinforces the idea that there is a confidence margin available to policymakers in Brazil, from which they can eventually take the option for increasing public expenditures as an economic strategy for smoothing the effects of the international financial crises without compromising the fiscal targets.