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Fiscal Sustainability and Monetary Versus Fiscal Dominance; Evidence From Brazil, 1991-2000

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  • Evan C Tanner
  • Alberto M. Ramos

Abstract

Under a monetary dominant (MD) regime, the primary surplus adjusts to limit debt growth, permitting monetary policy to be conducted independently of fiscal financing requirements. In Brazil, some evidence favors an MD regime for 1995–97, but not for the decade of the 1990s as a whole. While fiscal adjustments of 1999 yielded a primary surplus of about 3 percent of GDP, consistent with solvency, a credible MD regime would require further adjustments of the primary surplus if debt increases, growth falls, or interest rates rise.

Suggested Citation

  • Evan C Tanner & Alberto M. Ramos, 2002. "Fiscal Sustainability and Monetary Versus Fiscal Dominance; Evidence From Brazil, 1991-2000," IMF Working Papers 02/5, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:02/5
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    References listed on IDEAS

    as
    1. Woodford, Michael, 1995. "Price-level determinacy without control of a monetary aggregate," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 43(1), pages 1-46, December.
    2. Lawrence J. Christiano & Terry J. Fitzgerald, 2000. "Understanding the fiscal theory of the price level," Economic Review, Federal Reserve Bank of Cleveland, issue Q II, pages 2-38.
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    1. repec:ids:ijepee:v:10:y:2017:i:2:p:171-184 is not listed on IDEAS
    2. Fan, Jingwen & Minford, Patrick, 2009. "Can the Fiscal Theory of the price level explain UK inflation in the 1970s?," Cardiff Economics Working Papers E2009/26, Cardiff University, Cardiff Business School, Economics Section, revised Mar 2011.
    3. Carlos De Resende & Nooman Rebei, 2008. "The Welfare Implications of Fiscal Dominance," Staff Working Papers 08-28, Bank of Canada.
    4. Fan, Jingwen & Minford, Patrick & Ou, Zhirong, 2016. "The role of fiscal policy in Britain's Great Inflation," Economic Modelling, Elsevier, vol. 58(C), pages 203-218.
    5. Bajo-Rubio, Oscar & Díaz-Roldán, Carmen & Esteve, Vicente, 2009. "Deficit sustainability and inflation in EMU: An analysis from the Fiscal Theory of the Price Level," European Journal of Political Economy, Elsevier, vol. 25(4), pages 525-539, December.
    6. Fan, Jingwen & Minford, Patrick & Ou, Zhirong, 2013. "The Fiscal Theory of the Price Level - identification and testing for the UK in the 1970s," Cardiff Economics Working Papers E2013/12, Cardiff University, Cardiff Business School, Economics Section.
    7. Obinyeluaku, Moses & Viegi, Nicola, 2009. "How does fiscal policy affect monetary policy in the Southern African Community (SADC)?," MPRA Paper 15372, University Library of Munich, Germany.
    8. Andrea Fracasso, 2006. "The role of foreign and domestic factors in the evolution of the Brazilian EMBI spread and debt dynamics," IHEID Working Papers 22-2007, Economics Section, The Graduate Institute of International Studies, revised Jul 2007.
    9. Garima Vasishtha & Taimur Baig & Manmohan S. Kumar & Edda Zoli, 2006. "Fiscal and Monetary Nexus in Emerging Market Economies; How Does Debt Matter?," IMF Working Papers 06/184, International Monetary Fund.
    10. Peter Claeys & Raúl Ramos & Jordi Suriñach, 2008. "Testing the FTPL across government tiers," IREA Working Papers 200812, University of Barcelona, Research Institute of Applied Economics, revised Oct 2008.
    11. repec:pdc:jrnbeh:v:13:y:2017:i:4:p:522-535 is not listed on IDEAS
    12. Evan C Tanner, 2013. "Fiscal Sustainability; A 21st Century Guide for the Perplexed," IMF Working Papers 13/89, International Monetary Fund.
    13. William C. Gruben & John H. Welch, 2010. "Is Tighter Fiscal Policy Expansionary Under Fiscal Dominance?: Hypercrowding Out In Latin America," Contemporary Economic Policy, Western Economic Association International, vol. 28(2), pages 171-181, April.
    14. repec:sbe:breart:v:27:y:2007:i:1:a:1573 is not listed on IDEAS
    15. International Monetary Fund, 2006. "Zambia; Selected Issues and Statistical Appendix," IMF Staff Country Reports 06/118, International Monetary Fund.
    16. Ko, Jun-Hyung & Morita, Hiroshi, 2015. "Fiscal sustainability and regime shifts in Japan," Economic Modelling, Elsevier, vol. 46(C), pages 364-375.

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