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Debt ceiling and fiscal sustainability in Brazil: A quantile autoregression approach

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Author Info
Lima, Luiz Renato
Gaglianone, Wagner Piazza
Sampaio, Raquel M.B.

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Abstract

In this paper we investigate fiscal sustainability by using a quantile autoregression (QAR) model. We propose a novel methodology to separate periods of nonstationarity from stationary ones, allowing us to identify various trajectories of public debt that are compatible with fiscal sustainability. We use such trajectories to construct a debt ceiling, that is, the largest value of public debt that does not jeopardize long-run fiscal sustainability. We make an out-of-sample forecast of such a ceiling and show how it could be used by Policy makers interested in keeping the public debt on a sustainable path. We illustrate the applicability of our results using Brazilian data.

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Publisher Info
Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 86 (2008)
Issue (Month): 2 (June)
Pages: 313-335
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Handle: RePEc:eee:deveco:v:86:y:2008:i:2:p:313-335

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Mário Jorge Mendonça & Cláudio H. dos Santos, 2008. "Revisitando a Função de Reação Fiscal no Brasil Pós-Real: Uma Abordagem de Mudanças de Regime," Discussion Papers 1337, Instituto de Pesquisa Econômica Aplicada - IPEA. [Downloadable!]
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