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Fiscal sustainability and monetary versus fiscal dominance: evidence from Brazil, 1991-2000

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  • Evan Tanner
  • Alberto 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 favours an MD regime for 1995-1997, but not for the decade of the 1990s as a whole. While fiscal adjustments of 1999 yielded a primary surplus of about 3% 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.

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  • Evan Tanner & Alberto Ramos, 2003. "Fiscal sustainability and monetary versus fiscal dominance: evidence from Brazil, 1991-2000," Applied Economics, Taylor & Francis Journals, vol. 35(7), pages 859-873.
    • Handle: RePEc:taf:applec:v:35:y:2003:i:7:p:859-873
    DOI: 10.1080/0003684032000056832
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    References listed on IDEAS

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    1. 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.
    2. 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.
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