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The effect of monetary and fiscal credibility on public debt: empirical evidence from the Brazilian economy

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  • Helder Ferreira de Mendonça
  • Gabriela Elise Auel

Abstract

This study relates to the literature regarding credibility effect on public debt for developing economies under inflation targeting. The novelty is the investigation of effects of both monetary and fiscal credibility on public debt and its management. The main idea is that high credibility might improve public debt management. With this purpose, this paper addresses empirical evidence based on the Brazilian experience. The findings denote that credibility is an important instrument to improve the public debt management under inflation targeting.

Suggested Citation

  • Helder Ferreira de Mendonça & Gabriela Elise Auel, 2016. "The effect of monetary and fiscal credibility on public debt: empirical evidence from the Brazilian economy," Applied Economics Letters, Taylor & Francis Journals, vol. 23(11), pages 816-821, July.
    • Handle: RePEc:taf:apeclt:v:23:y:2016:i:11:p:816-821
    DOI: 10.1080/13504851.2015.1111980
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    References listed on IDEAS

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    1. Helder de Mendonca, 2007. "Towards credibility from inflation targeting: the Brazilian experience," Applied Economics, Taylor & Francis Journals, vol. 39(20), pages 2599-2615.
    2. de Mendonça, Helder Ferreira & de Guimarães e Souza, Gustavo José, 2009. "Inflation targeting credibility and reputation: The consequences for the interest rate," Economic Modelling, Elsevier, vol. 26(6), pages 1228-1238, November.
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    9. Patrick Georges, "undated". "Borrowing Short- or Long-Term: Does the Government Really Face a Trade-off?," Working Papers-Department of Finance Canada 2003-16, Department of Finance Canada.
    10. de Mendonça, Helder Ferreira & Machado, Marcelo Rangel, 2013. "Public debt management and credibility: Evidence from an emerging economy," Economic Modelling, Elsevier, vol. 30(C), pages 10-21.
    11. Montes, Gabriel Caldas, 2013. "Credibility and monetary transmission channels under inflation targeting: An econometric analysis from a developing country," Economic Modelling, Elsevier, vol. 30(C), pages 670-684.
    12. Salem KANOUN, 2014. "The Sustainability of Fiscal Adjustment Process : A Quantitative Approach With an Application to Tunisia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(10), pages 1314-1331, October.
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    Cited by:

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    2. Montes, Gabriel Caldas & Nicolay, Rodolfo Tomás da Fonseca & Acar, Tatiana, 2019. "Do fiscal communication and clarity of fiscal announcements affect public debt uncertainty? Evidence from Brazil," Journal of Economics and Business, Elsevier, vol. 103(C), pages 38-60.
    3. Gabriel Caldas Montes & Paulo henrique Luna, 2021. "Effects of discretionary fiscal policy and fiscal communication on fiscal credibility: Empirical evidence from Brazil," Economics Bulletin, AccessEcon, vol. 41(3), pages 1486-1500.
    4. Helder Ferreira de Mendonça & Vítor Ribeiro Laufer Calafate, 2021. "Lack of fiscal transparency and economic growth expectations: an empirical assessment from a large emerging economy," Empirical Economics, Springer, vol. 61(6), pages 2985-3027, December.
    5. Montes, Gabriel Caldas & Souza, Ivan, 2020. "Sovereign default risk, debt uncertainty and fiscal credibility: The case of Brazil," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    6. Gabriel Caldas Montes & Paulo Henrique Lourenço Luna, 2022. "Do fiscal opacity, fiscal impulse, and fiscal credibility affect disagreement about economic growth forecasts? Empirical evidence from Brazil considering the period of political instability and presid," Review of Development Economics, Wiley Blackwell, vol. 26(4), pages 2356-2393, November.

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