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Sustainability of the Brazilian fiscal policy and central bank independence

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  • Viviane Luporini

Abstract

This paper analyses the sustainability of fiscal policy in Brazil since the financial reform of 1965 and discusses how the relationship between the Treasury and the Central Bank has determined the federal government's capacity to finance itself. A sustainable policy is defined as one such that the discounted government debt as a ratio to GDP is backed by expected primary surpluses of equal present-value. In the context of an infinite-horizon framework, sustainability is tested through the mean-zero stationarity of the discounted debt/GDP ratio. Although the overall results indicate sustainability, tests on sub-samples show that the fiscal policy was sustainable prior to 1980, but it assumed an unsustainable path during the 1980s and early 1990s.

Suggested Citation

  • Viviane Luporini, 1999. "Sustainability of the Brazilian fiscal policy and central bank independence," Textos para Discussão Cedeplar-UFMG td125, Cedeplar, Universidade Federal de Minas Gerais.
    • Handle: RePEc:cdp:texdis:td125
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    File URL: https://www.cedeplar.ufmg.br/pesquisas/td/TD%20125.pdf
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    References listed on IDEAS

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    Cited by:

    1. Beenash Malik & M. Ali Kemal, 2018. "Measuring the Sufficient Debt Sustainability Condition in Pakistan," PIDE-Working Papers 2018:156, Pakistan Institute of Development Economics.

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    More about this item

    Keywords

    fiscal policy; federal debt; central bank independence; Brazil;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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