The imbalance of the Brazilian public sector: alternative scenarios

Carlos Alberto Primo Braga (), John H. Welch () and Paulo de Tarso Afonso de André ()

Brazilian Journal of Political Economy, 1987, vol. 7, issue 3, 299-311

Abstract: The Brazilian public sector disequilibrium, as measured by growth in the globalnet public sector debt to GDP ratio, is examined with and without the “Plano Cruzado”.Two models are used, one based upon a discrete time framework and the other based upon acontinuous time framework, to trace paths of the debt-GDP ratio for the rest of the decadeconcentrating on the 1985-1990 period. Two major conclusions are reached. The first, of atheoretical nature, is that discrete-time models are inappropriate in an inflationary contextas they severely underestimate the inflation tax. The second is that the Plano Cruzado mayput strong pressure on government finances due to the drastic fall in the inflation tax. JEL Classification: H63; E31.

Keywords: Cruzado plan; public debt (search for similar items in EconPapers)
Date: 1987
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