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Is fiscal policy effective in Brazil? An empirical analysis

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  • Holland, Marcio
  • Marçal, Emerson
  • de Prince, Diogo

Abstract

The main goal of this paper is to assess the effectiveness of government spending policy in Brazil through the impact of fiscal stimuli on output. With a sample spanning from 1997 to 2018, the paper scrutinizes the estimations controlling the state of the economy, nonlinearity approach, and the role of the monetary policy, mostly not yet studied in this country case. Regardless the approaches and the specifications, our estimates of the government spending multiplier are generally close to zero. Higher multipliers are reported using Threshold Vector Autoregression (TVAR) and other approaches, but they are not robust because of specifications issues. Lower multipliers were obtained using Jordà (2005)´s procedures, but are not statistically significant. This technique is one of the innovations of our paper for emerging countries.

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  • Holland, Marcio & Marçal, Emerson & de Prince, Diogo, 2020. "Is fiscal policy effective in Brazil? An empirical analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 40-52.
    • Handle: RePEc:eee:quaeco:v:75:y:2020:i:c:p:40-52
    DOI: 10.1016/j.qref.2019.03.002
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    More about this item

    Keywords

    Fiscal policy; Fiscal multiplier; Structural VAR; TVAR; Sign restriction;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General

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