Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/247224 
Year of Publication: 
2020
Series/Report no.: 
Discussion Paper No. 250
Publisher: 
Institute for Applied Economic Research (ipea), Brasília
Abstract: 
In this paper I use Ghosh et al. (2013) approach to assess Brazil's fiscal sustainability, fiscal fatigue, and public debt limit. Using monthly data for the last 21 years, I estimate Brazil's fiscal reaction function and an eventual fiscal fatigue effect, which is a lack of government's will (or capability) to implement higher primary surpluses as a reaction to higher levels of debt. I show that fiscal fatigue occurs at relatively mild levels of debt in Brazil. I also define Brazil's debt limit, which is the precise level of debt/GDP ratio above which the debt dynamics becomes explosive, public debt becomes unpayable, and the government invariably defaults. I show that the debt limit in Brazil is much lower than the limits that have been estimated for advanced economies.
Subjects: 
primary balance
debt/GDP ratio
fiscal fatigue
debt limit
JEL: 
C22
E62
H63
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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