Discretionary fiscal policy and disagreement in expectations about fiscal variables empirical evidence from Brazil

Gabriel Montes and Paulo Henrique Luna

Economic Modelling, 2018, vol. 73, issue C, 100-116

Abstract: The present paper provides evidence in support of the hypothesis that the use of discretionary fiscal policy creates disagreements in expectations about both public debt and budget balance. The analysis considers the Brazilian case. Brazil is an interesting case study once it presents serious problems of public accounts deterioration, and in addition it had the president of the republic removed from its position since she was condemned on the charge of having committed crimes of fiscal responsibility. The estimates are made through ordinary least squares, one-step generalized method of moments and two-step generalized method of moments. In order to give robustness to the results, the study also provides estimates through an autoregressive distributed lag modeling approach (ARDL). Besides, in order to dynamically analyze the relationships between discretionary fiscal policy and disagreements in expectations about fiscal variables, we present an impulse response analysis based on vector autoregressive (VAR) estimates. The results indicate that the adoption of discretionary fiscal policies increases the disagreement in expectations about fiscal variables, and thus creates uncertainties about the future behavior of both the public debt and the budget balance.

Keywords: Discretionary fiscal policy; Disagreement in expectations; Public debt; Budget balance (search for similar items in EconPapers)
JEL-codes: E62 H30 H63 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0264999317315201
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:73:y:2018:i:c:p:100-116

DOI: 10.1016/j.econmod.2018.03.007

Access Statistics for this article

Economic Modelling is currently edited by S. Hall and P. Pauly

More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().