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Fiscal crisis in Brazil: causes and remedy

Author

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  • Márcio Holland

Abstract

From 2014 to 2017, Brazil experienced unprecedented fiscal deterioration caused by multidimensional factors. According to the economic literature, to cope with such a crisis, it is recommended to adopt a long-term spending cut-based fiscal consolidation program rather than a tax hike-based one. However, as the fiscal crisis evolved recently in Brazil, this article brings another perspective to the policy stance. It suggests a fiscal program that includes a combination of spending cuts and tax hikes. On one hand, the peculiarities of the Brazilian government expenditures demand fiscal reforms with long-lasting impacts but generally with low short-term fiscal effect. On the other hand, as short-term fiscal results anchor confidence, increases in taxes would be an important pillar of the economic policies to mitigate the fiscal deterioration in the short term. The GDP contraction is expected to more severe than a simple spending cut measure but is likely to be less prolonged. JEL Classification: H30; H60; H12; H61.

Suggested Citation

  • Márcio Holland, 2019. "Fiscal crisis in Brazil: causes and remedy," Brazilian Journal of Political Economy, Center of Political Economy, vol. 39(1), pages 88-107.
    • Handle: RePEc:ekm:repojs:v:39:y:2019:i:1:p:88-107:id:27
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    File URL: https://centrodeeconomiapolitica.org.br/repojs/index.php/journal/article/view/27/22
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    Citations

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    Cited by:

    1. Diego A. B. Marconatto & Gaspar A. Peixoto & Emidio G. Teixeira & Adelar Fochezatto, 2022. "Women on the Front Line: The Growth of SMEs during Crises," Sustainability, MDPI, vol. 14(16), pages 1-18, August.
    2. Konstantinos Papageorgiou & Gustavo Carvalho & Elpiniki I. Papageorgiou & Dionysis Bochtis & George Stamoulis, 2020. "Decision-Making Process for Photovoltaic Solar Energy Sector Development using Fuzzy Cognitive Map Technique," Energies, MDPI, vol. 13(6), pages 1-23, March.
    3. Guilherme Cemin Paula & André M. Marques, 2022. "Brazilian Wage Curve: Further Evidence Based on Spatial Interactions in Times of Recession, 2012–2019," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 65(3), pages 689-708, September.

    More about this item

    Keywords

    Fiscal crisis; Brazilian Economy; Fiscal Adjustment; Fiscal Consolidation Program;
    All these keywords.

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management
    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems

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