A further deterioration of the Brazilian fiscal reaction in view of COVID-19

Eduardo Lima Campos (), Rubens Cysne and Alexandre Madureira

Brazilian Journal of Political Economy, 2022, vol. 42, issue 3, 664-677

Abstract: The fiscal reaction function measures how the government’s primary surplusreacts to the evolution of public debt. Campos and Cysne (2019b) observed that thereaction function has been almost steadily decreasing since 2012 and it has turned frompositive to negative values in 2017 and 2018. In the subsequent period, the improvementof some economic indicators led the fiscal reaction to a recovery. Nevertheless, in 2020,with the advent of COVID-19, health spending and emergency aids caused a sharp fiscaldeterioration, leading the fiscal reaction coefficient to assume, again, negative values. JEL Classification: H30; H60; E50.

Keywords: Brazil; fiscal reaction; COVID-19; Debt/GDP ratio; fiscal sustainability; Kalman filter (search for similar items in EconPapers)
Date: 2022
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