IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Consolidating Macroeconomic Adjustment in Brazil

  • Luiz de Mello
  • Diego Moccero

Brazil has made considerable progress in recent years towards consolidating macroeconomic stability, which is a key framework condition for sustained growth. Monetary policy continues to respond swiftly to changes in the inflation outlook, anchoring expectations. Fiscal policy has been guided by debt sustainability considerations, delivering primary budget surpluses that have often exceeded the end-year targets. Nevertheless, while the public debt-to-GDP has been reduced, it remains high, especially in comparison with other emerging-market economies. Brazil?s overarching macroeconomic challenge is therefore to continue to reduce the public debt overhang while improving the quality of fiscal adjustment, which has so far been underpinned by revenue hikes, rather than a retrenchment of expenditure commitments. To do so, measures will need to be taken to arrest the increase in current spending, especially on pensions, paving the way for subsequently removing distortions and reducing the tax burden over the medium to longer term, once the debt-to-GDP ratio has been reduced in a sustainable manner. The favourable domestic macroeconomic environment, with falling inflation and improving growth prospects, appears propitious for reform towards the gradual phasing-out of directed credit and a reduction in compulsory reserve requirements. Consolider l'ajustement macroéconomique en Brésil Le Brésil a remarquablement progressé ces dernières années vers la consolidation de la stabilité macroéconomique, condition indispensable d'une croissance durable. La politique monétaire continue de réagir promptement à l'évolution des perspectives d'inflation, ancrant ainsi les anticipations. La politique budgétaire a été guidée par des considérations relatives à la viabilité de la dette, dégageant des excédents primaires souvent supérieurs aux objectifs de fin d'année. Néanmoins, si le ratio dette publique-PIB a diminué, il demeure élevé, surtout en comparaison de ceux des autres économies de marché émergentes. La principale tâche macroéconomique à laquelle le Brésil doit s'atteler est par conséquent de réduire encore le niveau excessif de la dette publique tout en améliorant la qualité de l'ajustement budgétaire qui, jusqu'à présent, a résulté d'augmentations de recettes et non de compressions des engagements de dépenses. Pour ce faire, des mesures devront être prises afin de mettre un terme à l'alourdissement des dépenses courantes, surtout au titre des pensions, de façon à pouvoir ensuite alléger la charge fiscale sur le moyen terme, une fois que le ratio dette-PIB aura été réduit de manière durable. Le contexte macroéconomique favorable, caractérisé par un recul de l'inflation et une amélioration des perspectives de croissance, paraît propice à une réforme visant à supprimer progressivement le crédit administré et à abaisser les niveaux de réserves obligatoires.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 531.

in new window

Date of creation: 05 Dec 2006
Date of revision:
Handle: RePEc:oec:ecoaaa:531-en
Contact details of provider: Postal:
2 rue Andre Pascal, 75775 Paris Cedex 16

Phone: 33-(0)-1-45 24 82 00
Fax: 33-(0)-1-45 24 85 00
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Kim, Suk Joong & Moshirian, Fariborz & Wu, Eliza, 2005. "Dynamic stock market integration driven by the European Monetary Union: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2475-2502, October.
  2. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  3. Luiz de Mello & Diego Moccero, 2006. "Brazil's Fiscal Stance during 1995-2005: The Effect of Indebtedness on Fiscal Policy Over the Business Cycle," OECD Economics Department Working Papers 485, OECD Publishing.
  4. Antonio Moreno, 2003. "Reaching Inflation Stability," Faculty Working Papers 13/03, School of Economics and Business Administration, University of Navarra.
  5. Nathalie Girouard & Christophe André, 2005. "Measuring Cyclically-adjusted Budget Balances for OECD Countries," OECD Economics Department Working Papers 434, OECD Publishing.
  6. MINELLA André & DE FREITAS Paulo Springer & GOLDFAJN Ilan & KFOURY MUINHOS Marcelo, . "Inflation Targeting in Brazil: Constructing Credibility under Exchange Rate Volatility," EcoMod2003 330700103, EcoMod.
  7. BAUWENS, Luc & LAURENT, Sébastien & ROMBOUTS, Jeroen VK, . "Multivariate GARCH models: a survey," CORE Discussion Papers RP 1847, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Klaus Schmidt-Hebbel & Alejandro M. Werner, 2002. "Inflation Targeting in Brazil, Chile, and Mexico: Performance, Credibility, and the Exchange Rate," ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, ECONOMIA JOURNAL OF THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION, vol. 0(Spring 20), pages 31-90, January.
  9. Reisen, Helmut & von Maltzan, Julia, 1999. "Boom and Bust and Sovereign Ratings," International Finance, Wiley Blackwell, vol. 2(2), pages 273-93, July.
  10. Philip R. Lane, 2002. "The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD," Trinity Economics Papers 20022, Trinity College Dublin, Department of Economics.
  11. Luiz De Mello & Diego Moccero, 2009. "Monetary Policy and Inflation Expectations in Latin America: Long-Run Effects and Volatility Spillovers," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(8), pages 1671-1690, December.
  12. Alex Luiz Ferreira, 2010. "The determinants of default risk in Brazil," Applied Economics Letters, Taylor & Francis Journals, vol. 17(17), pages 1703-1708.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:531-en. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.