The aim of the present research is to build an open economy recursive general equilibrium model for the Brazilian economy in order to numerically assess the corresponding steady state equilibrium. This characterization allows us to numerically compute the endogenously determined steady state key relationship, namely the primary surplus aggregate output as well as the debt-product ratio among other variables, as functions of the monetary and fiscal policy parameters chosen by the government of the model economy. The adopted model introduces a transaction technology, which allows us to obtain a monetary equilibrium at steady state. This economy differs from the one used by Ljungqvist and Sargent (2000) for it considers an open economy with accumulation and production. The main result has shown that under the adopted parameterization the steady state of the model economy can numerically characterized by a debt output ratio of 0.3387. The numerical simulations show alternative steady states attainable by the government of the model economy. In order to finance higher expenses the government is bounded to trade-off higher interest rate (low inflation or high return on real money balances) with low operational surpluses due to the higher debt output ratio at the long run equilibrium.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number
92.
For technical questions regarding this item, or to correct its listing, contact: (Benjamin Tabak).
Related research
Keywords:
Other versions of this item:
References listed on IDEAS 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.:
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.)