The behavior of the Brazilian federal domestic debt

This paper analyses the sustainability of the Brazilian federal fiscal policy by examining the responses of the government budget surplus to variations of the debt-GDP ratio. The approach to assess sustainability, originally proposed by Bohn (1998), circumvents the problems present in traditional sustainability tests based on statistical properties of the debt, such as unit roots and cointegration. In particular, the regressions proposed do not require restrictive assumptions about real interest rates, the structure of the government debt or the agents’ behavior towards risk. Using annual data from 1966 to 2000, the results have indicated that the government surplus has not systematically responded to changes in the debt-income level previously observed, indicating that the fiscal policy cannot be considered sustainable during the period analyzed. Moreover, it is shown that the debt-GDP ratio does not exhibit a mean-reverting tendency even when one controls for cyclical variations in income and government expenditures, further indicating a non-sustainable path for the fiscal policy.federal domestic debt; fiscal consolidation; Brazil

Sustainability of Brazilian fiscal policy, once again: corrective policy response over time

This paper estimates a fiscal reaction function for Brazil and investigates how thegovernment´s fiscal reaction has changed over time when controlling for cyclical variationsin output and the relative participation of indexed debt. Using monthly datasince 1991, we estimate a rolling reaction function with a one observation step and asample-window of 12 observations. Our results indicate that the government´s fiscalresponse has been such that a one percent increase in the debt-GDP ratio can be associatedto an average increase in the primary surplus of approximately 0.096% over GDPor 9.6 basis points; the government´s fiscal reaction has become more stable but lessresponsive to the debt-income level after 2000 and assumed a declining trend after 2006.O artigo revisita a questão da sustentabilidade da política fiscal brasileira analisando asrespostas fiscais do governo a alterações na razão dívida-PIB, com vistas a avaliar qualtem sido a resposta fiscal média do governo brasileiro, e como essa resposta fiscal temvariado ao longo do tempo. Utilizando dados mensais e controlando para variaçõesno produto e participação relativa de títulos indexados, estimamos funções de reaçãosequenciais com uma janela móvel de 12 observações. Os resultados indicam que apolítica fiscal no período foi sustentável, com uma resposta fiscal média do governoconsolidado de 0.096 pontos percentuais no superávit primário para um aumento deum ponto percentual na relação dívida-PIB. Verificamos ainda que a função de reaçãotornou-se mais estável, porém menos sensível a aumentos da relação dívida/PIB apóso ano de 2000 e assumiu uma tendência declinante após 2006

The monetary transmission mechanism in Brazil: evidence from a var analysis

This article presents evidence on the interest channel of the monetary policy for the Brazilian economy of the 1990s analyzing the effects of an unexpected change in the baseline interest rate on output, prices and the exchange rate in a vector autoregression system. Our main results are: a) a tightening in the monetary policy affects economic activity immediately, reducing the rate of growth of real GDP; b) the exchange rate and prices are affected only after a time interval, with inflation assuming a downward trend only two months after the monetary shock; c) results do not change when the specification is controlled for international conditions, commodity prices or other measures of inflation and economic activity; d) monetary shocks have a significant impact on the volatility of output and inflation in the benchmark model e) monetary shocks have a significant impact on the volatility of the debt/GDP ratio in the control-model.Esse artigo analisa o canal juros do mecanismo de transmissão monetária sobre o produto, preços e taxa de câmbio na economia brasileira dos anos 90 através dos efeitos de uma redução inesperada na taxa básica de juros em um sistema de vetores auto-regressivos. Os principais resultados obtidos são: a) um choque monetário afeta imediatamente a atividade econômica, reduzindo a taxa de crescimento do PIB; b) a inflação e a taxa de câmbio são afetadas somente após um intervalo de tempo, e a inflação assume uma tendência declinante somente dois meses após o choque de juros; c) os resultados são robustos quando controlados para condições internacionais, preço das commodities ou outras medidas de inflação e atividade econômica; d) choques monetários afetam significativamente a volatilidade do produto e da inflação no modelo padrão; e) choques monetários afetam significativamente a volatilidade da relação dívida/PIB no modelo de controle

The federal domestic debt and state governments: the impact of the state debts on the federal government finances

This paper investigates how the finances of the Brazilian federal government responded to innovations in the debts of the most indebted states, Sao Paulo, Minas Gerais, Rio de Janeiro and Rio Grande do Sul. Using monthly data from 1981 to 1998, a vector autoregression system (VAR) is estimated to investigate the relationship between the federal government finances and the state debts. Results have indicated that state debts are relatively important to the forecast of the federal domestic debt when compared to the impact of a shock to government expenditures or tax revenues, but the effect of the state debts on the federal debt is very small when compared to the effects of a shock to the real interest rate

The behavior of the Brazilian federal domestic debt

This paper analyses the sustainability of the Brazilian federal fiscal policy by examining the responses of the government budget surplus to variations of the debt-GDP ratio. The approach to assess sustainability, proposed by Bohn (1998), circumvents the problems present in traditional sustainability tests, such as unit roots and cointegration. In particular, the regressions proposed do not require restrictive assumptions about real interest rates, the structure of the government debt or the agents' behavior towards risk. Using annual data from 1966 to 2000, the results have indicated that the government surplus has not systematically responded to changes in the debt-income level previously observed, indicating that the fiscal policy cannot be considered sustainable during the period analyzed. Moreover, it is shown thatthe debt-GDPratio does not exhibit a meanreverting tendency even when one controls for cyclical variations in income and government expenditures, further indicating a non-sustainable path for the fiscal policy

A SUSTENTABILIDADE DA DÍVIDA MOBILIÁRIA FEDERAL BRASILEIRA: UMA INVESTIGAÇÃO ADICIONAL

Este artigo investiga a sustentabilidade da dívida mobiliária brasileira usando dados trimestrais de 1981 a 1998. Uma dívida é considerada sustentável se a restrição orçamentária governamental é respeitada intertemporalmente. A sustentabilidade da dívida mobiliária federal é testada através da estacionaridade da razão dívida/PIB ao redor da média zero, utilizando testes de raiz unitária tradicionais e testando a hipótese nula de estacionaridade. Confirmando diagnósticos previamente obtidos, os resultados indicam que a dívida mobiliária federal assumiu um padrão insustentável durante o período estudado e que o governo tem, de fato, um incentivo para reestruturar sua dívida.This paper further investigates the sustainability of the Brazilian Federal domestic debt using quarterly data from 1981 to 1998. A debt is considered sustainable if the government's budget is intertemporally balanced. Sustainability is tested through the mean-zero stationarity of the discounted debt/GDP ratio with standard unit root tests and the null hypothesis of stationarity The results indicate that the federal domestic debt have assumed an unsustainable path during the period studied and that the government may indeed have an incentive to reestructure its debt

Asymmetric exchange rate pass-through: an empirical analysis for Brazil (1999-2013)

This paper investigates a possible non-linearity in the pass-through of the exchange rate to the Brazilian consumer price index. Using a decomposition of the exchange rate series, into appreciations and depreciations, for the period of 1999-2013, the paper estimates a sequence of SVAR models with different identifying restrictions. The results are robust and indicate an important asymmetric behavior of the exchange rate pass-through in Brazil. A simple average of the estimates indicates a pass-through of 11.38% in case of depreciation, and 2.84% in the case of appreciation of the Braziliancurrency against the US Dollar.O presente artigo analisou o repasse cambial para os preços ao consumidor (IPCA) no Brasil no período entre 1999 e 2013, verificando através de diversas especificações econométricas a existência de assimetrias no repasse. Utilizando uma decomposição da variável câmbio, entre depreciações e apreciações, o artigo estima uma sequência de modelos SVAR com diferentes restrições de identificação. Os resultados, robustos para uma gama de especificações, indicam forte assimetria no repasse cambial.  A média simples das diversas estimações indica um repasse de 11.38% no caso de depreciação e de 2.84% no caso de apreciação da moeda brasileira em relação ao dólar americano

The federal domestic debt and state governments: the impact of the state debts on the federal government finances

This paper investigates how the finances of the Brazilian federal government responded to innovations in the debts of the most indebted states, Sao Paulo, Minas Gerais, Rio de Janeiro and Rio Grande do Sul. Using monthly data from 1981 to 1998, a vector autoregression system (VAR) is estimated to investigate the relationship between the federal government finances and the state debts. Results have indicated that state debts are relatively important to the forecast of the federal domestic debt when compared to the impact of a shock to government expenditures or tax revenues, but the effect of the state debts on the federal debt is very small when compared to the effects of a shock to the real interest rate