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The Nature of Government Finance in Brazil

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  • Felipe de Rezende

Abstract

The aim of this paper is to focus on the institutional process by which the Brazilian government spends, borrows, and collects taxes. I am going to evaluate the conventional view that taxes finance government spending, that bond sales are financing operations, and that the Brazilian federal government is operationally constrained. This view arises from a misunderstanding of both treasury and central bank operations. Balance sheets are used to show the reserve effects of the treasury and central bank operations and to explain the cooperation between the central bank and the treasury. It concludes that logically taxes and bonds can not finance government spending and that a sovereign government that issues its own non convertible currency can not become insolvent.

Suggested Citation

  • Felipe de Rezende, 2009. "The Nature of Government Finance in Brazil," International Journal of Political Economy, Taylor & Francis Journals, vol. 38(1), pages 81-104.
    • Handle: RePEc:mes:ijpoec:v:38:y:2009:i:1:p:81-104
    DOI: 10.2753/IJP0891-1916380104
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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Did Ms. Rousseff’s epiphany come too late?
      by admin in New Economic Perspectives on 2014-10-15 18:36:23
    2. Did Ms. Rousseff’s Epiphany Come Too Late?
      by Michael Stephens in Multiplier Effect on 2014-10-15 20:30:17

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    Cited by:

    1. Summa, Ricardo de Figueiredo, 2022. "Alternative uses of functional finance: Lerner, MMT and the Sraffiansh," IPE Working Papers 175/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    2. Eric Tymoigne & L. Randall Wray, 2013. "Modern Money Theory 101: A Reply to Critics," Economics Working Paper Archive wp_778, Levy Economics Institute.
    3. Felipe Rezende, 2015. "Why does Brazil’s banking sector need public banks? What should BNDES do?," PSL Quarterly Review, Economia civile, vol. 68(274), pages 239-275.
    4. L. Randall Wray, 2020. "The "Kansas City" Approach to Modern Money Theory," Economics Working Paper Archive wp_961, Levy Economics Institute.

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