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

Author

Listed:
  • 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)

Abstract

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.

Suggested Citation

  • Elcyon Caiado Rocha Lima & Alexis Maka & Amadeu Pumar, 2012. "The Effects of Fiscal Policy and its Interactions with Monetary Policy in Brazil," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 13(1), pages 149-180.
  • Handle: RePEc:anp:econom:v:13:y:2012:i:1:149_180
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    Keywords

    Structural VAR; Hybrid Identification; Fiscal Policy; Monetary Policy;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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