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The Interaction of Monetary and Fiscal Policy: The Brazilian Case

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DOI: 10.4236/me.2011.22016    5,395 Downloads   10,011 Views   Citations

ABSTRACT

We tested, empirically, whether the Brazilian fiscal policy for the period between 1995:I to 2008:III was active or passive. To analyze fiscal policy transmission mechanisms, we estimated functions by which the public debt/GDP ratio affects investment, primary surplus, output gap and the demand for money. The ratio of public debt to GDP was found to be statistically significant, positively affecting the demand for money and the primary surplus, whereas it was found to negatively affect the level of investment and the output gap. We conclude that the Brazilian regime was non-Ricardian in the context of fiscal dominance.

Cite this paper

T. Moreira, F. Soares, A. Sachsida and P. Loureiro, "The Interaction of Monetary and Fiscal Policy: The Brazilian Case," Modern Economy, Vol. 2 No. 2, 2011, pp. 114-123. doi: 10.4236/me.2011.22016.

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