Banca de DEFESA: Helder Lara Ferreira Filho

Uma banca de DEFESA de DOUTORADO foi cadastrada pelo programa.
STUDENT : Helder Lara Ferreira Filho
DATE: 07/06/2023
TIME: 10:00
LOCAL: Vídeo Conferência
TITLE:

Public Debt Sustainability, Fiscal Rules and Multipliers: Theory, International Experience and the Brazilian Case

KEY WORDS:

Public debt; debt trajectory; fiscal sustainability; debt stationarity; cointegration of fiscal series; fiscal reaction function; fiscal rules; Golden Rule; Fiscal Responsibility Law; Spending Ceiling; Fiscal Framework; fiscal multipliers; fiscal policy; public investment; local projections.

PAGES: 145
BIG AREA: Ciências Sociais Aplicadas
AREA: Economia
SUMMARY:

Brazilian fiscal sustainability has been questioned mainly since 2013 and after several recent shocks, such as the 2014-2016 recession and COVID-19 in 2020. This is despite the fiscal framework in force in that period, including the spending cap. Fiscal sustainability can affect economy’s growth and stability, mainly due to economic agents’ conventions and the currencies’ hierarchy. Therefore, the first two chapters seek to verify the sustainability of Brazil’s public debt. In the first chapter, the debt dynamics of Brazil until 2040 is made based on its conditioning factors, including outlining scenarios based on different hypotheses. The components of debt variation “r-g” and the primary result are quite relevant in this dynamic, but the stock-flow adjustments have proved to be crucial in the last 15 years, often being the first or second most important determinant of debt variation. It cannot be concluded that debt is on an explosive trajectory, but, in more pessimistic scenarios, this could happen. In the second chapter, after reviewing the literature on different methodologies for analyzing debt sustainability, three of them were used. The first is through the stationarity analysis of the public debt. The second is through a cointegration analysis between revenues and expenses to verify whether these series move together. The third is based on estimating the Brazilian fiscal reaction function. The debt measures showed stationarity. The revenue and expenditure series were not shown to be cointegrated. The fiscal reaction function showed a significant response of the primary result to debt increases. According to these approaches, except for the second which has certain limitations, the public debt appears to be sustainable from a general perspective. However, the situation is not comfortable, also because Brazil's debt is higher than that of other emerging countries. Debt could be reduced with an increase in economic growth, with an increase in revenues, with a reduction in expenses, or with a combination of these options, and the reduction of interest rates can help in the process. In this regard, a robust fiscal framework could favor economic agents' expectations about fiscal sustainability, which would tend to reduce interest rates. Furthermore, this framework can be more growth-friendly, also benefiting debt sustainability. In the third chapter, an analysis of the literature on fiscal rules is carried out, investigating international practice. It appears that the fiscal framework in Brazil has inconsistencies. The primary result rule often produces a pro-cyclical fiscal policy that penalizes more qualified spending, harming economic growth and fiscal sustainability itself. The spending ceiling proves to be unfeasible, unless the role of the State in accordance with the 1988 Constitution is modified. Furthermore, the ceiling induces practices such as tax waivers to encourage the economy, postponement of expenses and increasingly out of cap expenses. The fiscal framework is also ineffective when we estimate the country's fiscal reaction function considering a variable on the strength of fiscal rules in Brazil. The new framework proposed in 2023 by the government makes progress, but has some problems. The adoption of a cycle-adjusted primary result rule is suggested, with the abandonment of the golden rule and the expenditure cap. The rule would resolve the pro-cyclical character of fiscal policy and would take into account the commodity cycles that affect the Brazilian economy. Another relevant point in the discussion of fiscal sustainability is the composition of fiscal adjustments and their consequences on economic growth. Fiscal multipliers could form part of a strategy to optimize fiscal policy, favoring growth and, therefore, fiscal sustainability itself. Thus, the fourth chapter, after reviewing the literature on fiscal multipliers in Brazil and in the world, seeks to estimate the multiplier of public investment by the Central Government for the period between 2008 and 2022. The method used is local projections, which has a series of advantages compared to other alternatives, and has no application for investments in Brazil. The results point to high multipliers, particularly in the first 10 to 18 months after the public investment shock. This implies the need to preserve and increase public investment in the country, which can have positive effects on economic growth and on the sustainable trajectory of debt as a proportion of GDP in the country.

BANKING MEMBERS:
Externo à Instituição - JESUS FERREIRO - UPV
Externo à Instituição - LUÍS CARLOS GARCIA DE MAGALHÃES
Presidente - 6999314 - JOSE LUIS DA COSTA OREIRO
Interno - 079.012.567-61 - MANOEL CARLOS DE CASTRO PIRES - UnB
Interno - 1229140 - ROBERTO DE GOES ELLERY JUNIOR