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The imbalance of the Brazilian public sector: alternative scenarios

Author

Listed:
  • Carlos Alberto Primo Braga
  • John H. Welch
  • Paulo de Tarso Afonso de André

Abstract

The Brazilian public sector disequilibrium, as measured by growth in the globalnet public sector debt to GDP ratio, is examined with and without the “Plano Cruzado”.Two models are used, one based upon a discrete time framework and the other based upon acontinuous time framework, to trace paths of the debt-GDP ratio for the rest of the decadeconcentrating on the 1985-1990 period. Two major conclusions are reached. The first, of atheoretical nature, is that discrete-time models are inappropriate in an inflationary contextas they severely underestimate the inflation tax. The second is that the Plano Cruzado mayput strong pressure on government finances due to the drastic fall in the inflation tax. JEL Classification: H63; E31.

Suggested Citation

  • Carlos Alberto Primo Braga & John H. Welch & Paulo de Tarso Afonso de André, 1987. "The imbalance of the Brazilian public sector: alternative scenarios," Brazilian Journal of Political Economy, Center of Political Economy, vol. 7(3), pages 299-311.
    • Handle: RePEc:ekm:repojs:v:7:y:1987:i:3:p:299-311:id:1655
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    More about this item

    Keywords

    Cruzado plan; public debt;

    JEL classification:

    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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