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Is there Evidence of Expansionary Austerity in Brazil?

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  • Salomão, Benito Adelmo

Abstract

This article tests the expansionist austerity hypothesis for Brazil between January 2000 and December 2020 through Nonlinear Autoregressive Distributed Lags (NARDL) models. Among the results, a long-term relationship was verified between GDP, gross and net public debt, total, direct and indirect taxes, in addition to total, mandatory and discretionary expenses. With regard to the short-term dynamics, measured by the Error Correction Models, the shocks that affect the Brazilian economy dissipate, however, the adjustment dynamics is too slow for all the fiscal variables tested. It was also verified that the short-term adjustment on the expenditure side is slower in relation to taxes and debt. Finally, the analysis of dynamic multipliers reports that austerity policies in Brazil, undertaken on the expenditure, tax or debt side, are expansionist.

Suggested Citation

  • Salomão, Benito Adelmo, 2023. "Is there Evidence of Expansionary Austerity in Brazil?," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 77(3), August.
    • Handle: RePEc:fgv:epgrbe:v:77:y:2023:i:3:a:85492
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