Sustentabilidade da Dívida dos Estados Brasileiros: 2005-2015

The aim of this article is to evaluate the debt sustainability of the Brazilian states during the period of 2005 to 2015. In this sense, the paper starts analysing the financial and economic data of the states. In order to verify whether state governments respond sustainedly to public debt accumulation, two empirical exercises are carried out using panel data. The first followed the proposal of Hamilton and Flavin (1986) and aimed to verify the results of the intertemporal budget constraint in the state governments budgets by checking the stationarity of economic time series by performing unit root tests. The second exercise, which complemented the analysis of debt sustainability of this study by estimating a fiscal reaction function, was based on the proposal presented by Bohn (2008), and estimated a fiscal reaction function using the panel model dynamic System GMM to determine whether state governments respond to the increase of public debt in terms of generating a primary surplus. The conclusion is that the Brazilian states have a solvent debt and an active fiscal policy, proving the sustainability of the debt of the Brazilian states for the period considered. However, this conclusion refers to the group of the states and may not represent the reality of each federative state, as it reflects the main behavior of the states.