Fiscal Sustainability and Monetary Versus Fiscal Dominance [electronic resource] : Evidence From Brazil, 1991-2000 / Evan Tanner.
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TextSeries: IMF Working Papers; Working Paper ; No. 02/5Publication details: Washington, D.C. : International Monetary Fund, 2002Description: 1 online resource (30 p.)ISBN: 1451842198 :ISSN: 1018-5941Subject(s): Deficit | Economywide Country Studies | Fiscal Theory of the Price Level | Inflation | Intertemporal Solvency | Macroeconomic - Aspects of Public Finance | BrazilAdditional physical formats: Print Version:: Fiscal Sustainability and Monetary Versus Fiscal Dominance : Evidence From Brazil, 1991-2000Online resources: IMF e-Library | IMF Book Store 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.
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.
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