Suggestion of a new constitutional rule on state government debt

Paulo Matos

Revista Brasileira de Economia - RBE, 2025, vol. 79, issue 4

Abstract: I add to the discussion on the implementation of a debt management mechanism for state governments in Brazil, based on the most current scientific understanding of the dilemma between the importance of public debt and the concern about its size. The purpose is to make use of an appropriate and specific accounting and fiscal framework for these federative entities, aiming to derive an empirically testable theoretical equation, which allows me the proposition of a dynamic rule associating current debt and future surplus flow, under the premise that the debt is solvent. This new rule is applied for the years 2022 and 2023, subsidizing in practice the scientific discussion related to the definition of new legislation capable of promoting more well-founded, modern, and efficient monitoring of state government debt in Brazil.

Date: 2025
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