Fiscal Sustainability and Monetary Versus Fiscal Dominance: Evidence From Brazil, 1991-2000

January 1, 2002

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Evan C Tanner, and Alberto M. Ramos Fiscal Sustainability and Monetary Versus Fiscal Dominance: Evidence From Brazil, 1991-2000, (USA: International Monetary Fund, 2002) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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 favors an MD regime for 1995–97, but not for the decade of the 1990s as a whole. While fiscal adjustments of 1999 yielded a primary surplus of about 3 percent 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.

Subject: External debt, Financial sector policy and analysis, Financial services, Fiscal consolidation, Fiscal policy, Interest payments, Public debt, Real interest rates, Solvency

Keywords: Asia and Pacific, Authorities' adjustment, Brazil's government, FD regime, Fiscal consolidation, Fiscal theory of the price level, Government, Government solvent, Interest payments, Intertemporal solvency, Managed exchange rate regime, Monetary and fiscal dominance, Price level, Real interest rates, Solvency, Vector autoregression, WP

Publication Details

Pages:

30
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2002/005
Stock No:

WPIEA0052002
ISBN:

9781451842197
ISSN:

1018-5941

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