Blanco, FernandoHerrera, Santiago2012-06-262012-06-262006-09https://hdl.handle.net/10986/9299The authors describe the main trends of Brazil's fiscal policy during the past decade and analyze (1) the ability to raise the primary surplus in response to external shocks, (2) the pro-cyclical nature of fiscal policy, and (3) the long-run impact of government expenditure composition and taxation. They analyze the use of the primary balance as a policy tool within the Drudi-Prati model, wherein the government uses the primary balance to reveal its commitment to service its debt. The authors verify that both the debt ratio and the primary balance are determinants of spreads and credit ratings in Brazil. But the relationship is nonlinear: the impact of the primary balance on spreads is amplified as the debt ratio increases. Using an Autoregressive Distributed Lag (ARDL) approach, the authors analyze the relationship between the primary balance and economic activity, finding a positive correlation in the long run. However, in the short run fiscal expansions are associated with primary balance reductions and vice-versa during output contractions, confirming the procyclical nature of fiscal policy in the short run. The authors use two approaches, ARDL and a cointegrating value at risk (VAR), to analyze the interaction between public expenditure composition and taxation on growth. Similar results are obtained: large elasticities of output with respect to capital stocks, a significant negative impact of taxation on long-run GDP, and a negative impact of increasing government consumption and transfer payments on GDP. These results shed light on the contribution of fiscal policy to disappointing growth performance in Brazil during the past decade.en-USCC BY 3.0 IGOAICASSET PRICESAUTOMATIC STABILIZERSBALANCE SHEETSBORROWINGBUDGET CONSTRAINTBUDGET CONSTRAINTSBUDGET PROCESSBUSINESS CYCLECAPITA TERMSCAPITAL EXPENDITURESCAPITAL FLOWSCAPITAL INFLOWSCAPITAL MARKETSCAPITAL SPENDINGCAPITAL STOCKCASH FLOWCENTRAL BANKCREDIT RATINGSCURRENT EXPENDITURESCYCLICAL FISCAL POLICYDEBT CRISISDEBT DYNAMICSDEBT RATIODEBT RATIOSDEBT SERVICEDEBT SUSTAINABILITYDEPOSITSDOMESTIC DEBTDOMESTIC INTEREST RATESECONOMIC POLICYECONOMIC REFORMECONOMIC REFORMSECONOMIC SLOWDOWNELASTICITIESELASTICITYERROR-CORRECTION TERMEXCHANGE RATEEXPENDITURESEXTERNAL FINANCINGEXTERNAL SHOCKSFINANCIAL CRISESFINANCIAL TRANSACTIONSFISCAL ACCOUNTSFISCAL ADJUSTMENTFISCAL ADJUSTMENT EFFORTFISCAL BALANCEFISCAL BALANCESFISCAL CONDITIONSFISCAL DISCIPLINEFISCAL DISEQUILIBRIAFISCAL EXPANSIONFISCAL EXPANSIONSFISCAL IMBALANCEFISCAL IMPACTFISCAL OUTCOMESFISCAL POLICYFISCAL REFORMFISCAL RESULTSFISCAL STABILITYFISCAL STANCEFISCAL SUSTAINABILITYFISCAL SYSTEMFISCAL VARIABLESFORECASTSFUTURE VALUEGDPGDP PER CAPITAGOVERNMENT ACCOUNTSGOVERNMENT BONDSGOVERNMENT CONSUMPTIONGOVERNMENT EXPENDITUREGOVERNMENT EXPENDITURE COMPOSITIONGOVERNMENT SPENDINGGOVERNMENT SUBSIDIESGROWTH RATEHEALTH SERVICESHIGHER INTERESTHIGHER INTEREST PAYMENTSINDEXATIONINFLATIONINFLATION RATEINSURANCEINTEREST PAYMENTSINTEREST RATEINTERGOVERNMENTAL TRANSFERSINTERNATIONAL RESERVESLEGAL FRAMEWORKLIQUIDITYLOCAL GOVERNMENTSMANDATORY SPENDINGMONETARY AUTHORITIESMONETARY EXPANSIONMONETARY IMPACTMONETARY POLICYMONEY CREATIONMUNICIPALITIESMUTUAL FUNDNATIONAL ACCOUNTSNATIONAL INCOMENEGATIVE REAL INTEREST RATESNET WORTHNOMINAL EXCHANGE RATEOPEN MARKET OPERATIONSOPERATIONAL BALANCEPERSONNEL EXPENDITURESPRESENT VALUEPRESENT VALUE OF DEBTPRICE CONTROLSPRIMARY BALANCEPRIMARY EXPENDITUREPRIMARY SURPLUSPRIVATE SECTORPROBABILITY OF DEFAULTPRODUCTION FUNCTIONPUBLIC CAPITALPUBLIC CONSUMPTIONPUBLIC DEBTPUBLIC EMPLOYEESPUBLIC ENTERPRISESPUBLIC EXPENDITUREPUBLIC EXPENDITURE COMPOSITIONPUBLIC FINANCEPUBLIC FINANCESPUBLIC INVESTMENTPUBLIC SECTORPUBLIC SECTOR DEFICITSPUBLIC SECTOR EMPLOYEESPUBLIC SPENDINGREAL INTEREST RATEREAL INTEREST RATESREAL TERMSREVENUE INCREASESREVENUE RATIORISK AVERSIONRISK PREMIUMSAVINGSSIGNALINGSOCIAL ASSISTANCESOCIAL CONTRIBUTIONSSOCIAL SECURITYSOCIAL SECURITY SYSTEMSOCIAL SERVICESSOFT BUDGET CONSTRAINTSSOVEREIGN RISKSTATE GOVERNMENTSTAXTAX BURDENTAX RATIOTAX REFORMTAX REVENUETAX REVENUESTAXATIONTIGHT MONETARY POLICYTOTAL EXPENDITURETOTAL REVENUETRANSFER PAYMENTSTRANSPARENCYUNCERTAINTYUNEMPLOYMENTThe Quality of Fiscal Adjustment and the Long-Run Growth Impact of Fiscal Policy in BrazilWorld Bank10.1596/1813-9450-4004