Master's – Fiscal policy and output dynamics: an analysis based on fiscal multipliers in Brazil

Tipo de evento: 
Data e hora: 
19/06/2020 - 14:00 to 17:00


Marina Da Silva Sanches

Master's – Fiscal policy and output dynamics: an analysis based on fiscal multipliers in Brazil

Advisor: Profª Drª Laura Barbosa de Carvalho

Comission: Profs. Drs. Júlia de Medeiros Braga, Esther Dweck and Gilberto Tadeu Lima 

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Based on Blanchard and Perotti (2002)’s Structural VAR approach, we estimated, in our first paper, fiscal multipliers for different components of Brazilian federal government’s expenditures, as well as for different sub-periods within the 1997-2017 sample. Results suggest a higher and more persistent expenditure multiplier in the full sample, which includes the country’s current economic crisis, than in the period 1997-2014. The difference arises from only two components – social benefits and public investment – which generate the highest multiplier effects. Based on these estimations, we analyse, in particular, the effects of the substitution of public investment for subsidies from 2011 and of the investment cuts from 2015. Some alternative scenarios, with other ways of fiscal adjustment, will be built from the estimated multipliers. In the scenarios in which the fiscal policy plays an anti-cyclic role, increasing public investments, the recent Brazilian economic crisis would be much less severe and the economic recovery, so much faster. We also contribute to the fiscal multiplier empirical literature in our second paper, in which the focus is only on social benefits multipliers. Although there is a consensus in the literature that public investment has a great multiplier effect, it is not the case of the social benefits expenditures, whose impact has only been marginally exploited - and it is similar to the public investment impact in our study. We show that for each \textit{real} spent on social benefits, there is a boost to GDP (in accumulated terms) which is greater in the whole sample than in the exercise carried out for the pre-crisis sample. Besides, when we disaggregate the effect on different GDP components, our paper suggests that there is a relevant accumulated multiplier effect both in terms of household consumption and private investment. Also, all social benefits components, to a smaller or larger extent, show a difference between the response in the sample that includes the country’s current economic crisis and the pre-crisis sample. Finally, our third paper contributes to the Kaleckian models literature and builds a theoretical model to explain a possible channel for one of our previous results: the greater impact of social benefits on the output in the sample that includes the recent recession. Our model includes the household indebtedness -  more specifically the indebtedness of the workers who receive income from social benefits - which performs a significant stabilizing effect in the aggregated demand.

*Abstract provided by the author




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