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Do business confidence and economic growth expectations react to discretionary fiscal policy, fiscal opacity, and fiscal credibility?

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  • Gabriel Caldas Montes

    (Fluminense Federal University
    National Council for Scientific and Technological Development (CNPq))

  • Joaci Mariano Cabral

    (Fluminense Federal University)

Abstract

This paper investigates the effects of discretionary fiscal policy, fiscal opacity and fiscal credibility on business confidence and professional forecasters’ expectations. The study is the first to empirically address these relationships for a major emerging economy (Brazil). The results show that discretionary fiscal policy is harmful to business confidence, fiscal credibility improvements increase business confidence, and fiscal opacity can lead to a deterioration in business confidence. The findings also show that the government’s efforts to increase the primary surplus increase business confidence. The results, using economic growth expectations as dependent variables, were consistent with those found for business confidence.

Suggested Citation

  • Gabriel Caldas Montes & Joaci Mariano Cabral, 2025. "Do business confidence and economic growth expectations react to discretionary fiscal policy, fiscal opacity, and fiscal credibility?," International Economics and Economic Policy, Springer, vol. 22(3), pages 1-43, July.
    • Handle: RePEc:kap:iecepo:v:22:y:2025:i:3:d:10.1007_s10368-025-00667-7
    DOI: 10.1007/s10368-025-00667-7
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