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The performance of fiscal policy under an inflation targeting regime: What can be learned by the Brazilian fiscal rules?

Author

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  • Carmen Díaz‐Roldán
  • Fernando Ferrari‐Filho
  • Julimar da Silva Bichara

Abstract

This paper aims at, on the one hand, analyzing the Brazilian fiscal performance since the implementation of inflation targeting regime (ITR), June 1994, and the usefulness of fiscal rules to reach fiscal discipline in Brazil. On the other hand, it tries to evaluate what would have happened to the Brazilian government deficit if the new fiscal regime, that was implemented in 2016, would have been applied after the implementation of the ITR. Into this direction, we present an empirical analysis to describe three different fiscal rule scenarios, which includes a restriction related to inflation, depending on the preferences of the fiscal authorities: the austere, the symmetric or indifferent or the growth‐promoting environment. The main result of our empirical analysis is that, even in a context of ITR, the use of proper fiscal rule (countercyclical fiscal policy) helps to rationalize fiscal consolidation efforts by promoting a favorable environment for economic growth.

Suggested Citation

  • Carmen Díaz‐Roldán & Fernando Ferrari‐Filho & Julimar da Silva Bichara, 2019. "The performance of fiscal policy under an inflation targeting regime: What can be learned by the Brazilian fiscal rules?," Metroeconomica, Wiley Blackwell, vol. 70(1), pages 98-118, February.
    • Handle: RePEc:bla:metroe:v:70:y:2019:i:1:p:98-118
    DOI: 10.1111/meca.12231
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    Cited by:

    1. Díaz-Roldán Carmen & Filho Fernando Ferrari & da Silva Bichara Julimar, 2021. "Fiscal Rules in Economic Crisis: The Trade-off Between Consolidation and Recovery, from a European Perspective," Economics - The Open-Access, Open-Assessment Journal, De Gruyter, vol. 15(1), pages 199-216, January.

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