The Effects of Fiscal Policy and its Interactions with Monetary Policy in Brazil

Elcyon Caiado Rocha Lima, Alexis Maka and Amadeu Pumar
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Elcyon Caiado Rocha Lima: Universidade Estadual do Rio de Janeiro (UERJ) and Instituto de Pesquisa Econômica Aplicada (IPEA), Rio de Janeiro, Brazil
Amadeu Pumar: Universidade Estadual do Rio de Janeiro (UERJ), Rio de Janeiro, Brazil

Economia, 2012, vol. 13, issue 1, 149_180

Abstract: This paper analyzes the effects of fiscal policy shocks on the dynamics of the economy and the interaction between fiscal and monetary policy using structural vector autoregressions (SVARs). We test the Fiscal Theory of the Price Level for Brazil, analyzing the response of public sector liabilities to primary surplus shocks. For the hybrid identification we find that it is not possible to distinguish empirically between Ricardian (Monetary Dominance) and non-Ricardian (Fiscal Dominance) regimes. However, using sign restrictions there is some evidence that the government followed a Ricardian (Monetary Dominance) regime from January 2000 to June 2008.

Keywords: Structural VAR; Hybrid Identification; Fiscal Policy; Monetary Policy (search for similar items in EconPapers)
JEL-codes: C32 E31 E62 E63 (search for similar items in EconPapers)
Date: 2012
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