Fiscal Consolidation and Macroeconomic Challenges in Brazil
12 Pages Posted: 13 Apr 2013
Date Written: October 1, 2012
This paper explores two important points regarding the Brazilian fiscal framework. The first part analyses the significant improvement of the fiscal stance in the last decade as the result of the promotion of fiscal discipline and debt management policies. This consolidation is argued to be one of the reasons why Brazil has not been subject to the same concerns about debt sustainability that have become a focal point in most developed economies. The second part studies how the coordination between monetary and fiscal policies is important in dealing with the issues that arose in the aftermath of the recent crisis. By using models simulated with Brazilian data, we show that the implications for inflation of implementing a fiscal retrenchment policy crucially depend on which instrument is being used and on the behaviour of monetary policy.
Keywords: Fiscal consolidation, fiscal policy, debt management, monetary policy, macroeconomic stabilization
JEL Classification: E52, E62, E63
Suggested Citation: Suggested Citation