Fiscal Sustainability and Monetary Versus Fiscal Dominance: Evidence From Brazil, 1991-2000

Evan Tanner () and Alberto Ramos

No 2002/005, IMF Working Papers from International Monetary Fund

Abstract: Under a monetary dominant (MD) regime, the primary surplus adjusts to limit debt growth, permitting monetary policy to be conducted independently of fiscal financing requirements. In Brazil, some evidence favors an MD regime for 1995–97, but not for the decade of the 1990s as a whole. While fiscal adjustments of 1999 yielded a primary surplus of about 3 percent of GDP, consistent with solvency, a credible MD regime would require further adjustments of the primary surplus if debt increases, growth falls, or interest rates rise.

Keywords: WP; FD regime; government; price level; Intertemporal solvency; monetary and fiscal dominance; fiscal theory of the price level; vector autoregression; government solvent; authorities' adjustment; Brazil's government; managed exchange rate regime; Real interest rates; Interest payments; Solvency; Fiscal consolidation; Asia and Pacific (search for similar items in EconPapers)
Pages: 30
Date: 2002-01-01
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Citations: View citations in EconPapers (13)

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Journal Article: Fiscal sustainability and monetary versus fiscal dominance: evidence from Brazil, 1991-2000 (2003)
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