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The Effects of Fiscal Policy and its Interactions with Monetary Policy in Brazil

Listed author(s):
  • Elcyon Caiado Rocha Lima

    (Universidade Estadual do Rio de Janeiro (UERJ) and Instituto de Pesquisa Econômica Aplicada (IPEA), Rio de Janeiro, Brazil)

  • Alexis Maka

    (Instituto de Pesquisa Econômica Aplicada (IPEA), Rio de Janeiro, Brazil)

  • Amadeu Pumar

    (Universidade Estadual do Rio de Janeiro (UERJ), Rio de Janeiro, Brazil)

This paper analyzes the effects of fiscal policy shocks on the dynamics of the economy and the interaction between fiscal and monetary policy using structural vector autoregressions (SVARs). We test the Fiscal Theory of the Price Level for Brazil, analyzing the response of public sector liabilities to primary surplus shocks. For the hybrid identification we find that it is not possible to distinguish empirically between Ricardian (Monetary Dominance) and non-Ricardian (Fiscal Dominance) regimes. However, using sign restrictions there is some evidence that the government followed a Ricardian (Monetary Dominance) regime from January 2000 to June 2008.

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Article provided by ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics] in its journal Economia.

Volume (Year): 13 (2012)
Issue (Month): 1 ()
Pages: 149-180

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Handle: RePEc:anp:econom:v:13:y:2012:i:1:149_180
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Order Information: Postal: Secretaria da ANPEC Rua Prof Marcos Valdemar de Freitas Reis s/n Campus do Gragoatá Bloco F Niterói, RJ 24210-201 Brazil
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