Strategic fiscal and monetary interactions in the Brazilian economy

Paulo Victor Da Fonseca

Revista Brasileira de Economia - RBE, 2026, vol. 80, issue 1

Abstract: This paper identifies the leadership structure of the game played by monetary and fiscal authorities in the post-inflation targeting Brazilian economy. A small-scale New Keynesian model augmented with fiscal policy is estimated using Bayesian methods. We assume that monetary and fiscal authorities can act strategically under discretion in a non-cooperative setup and compare three different games: (i) simultaneous move; (ii) fiscal leadership; and (iii) monetary leadership. We find strong empirical support for the hypothesis that the fiscal authority acts as a Stackelberg leader. The results can shed some light to the improvement of policy design in the Brazilian economy.

Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgrbe:v:80:y:2026:i:1:a:81603

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