Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/329583 
Year of Publication: 
2025
Citation: 
[Journal:] EconomiA [ISSN:] 2358-2820 [Volume:] 26 [Issue:] 1 [Year:] 2025 [Pages:] 108-126
Publisher: 
Emerald, Bingley
Abstract: 
Purpose: This study aims to elucidate the dynamics of monetary and fiscal policy interactions in Brazil, focusing on the impacts of positive shocks in government consumption and interest rates. By comparing rational and behavioral agent responses, it clarifies how these frameworks influence gross domestic product (GDP), inflation, private and government consumption and nominal interest rates. Design/methodology/approach: The study employs a new Keynesian dynamic stochastic general equilibrium (DSGE) model with Bayesian estimation from 2000Q1 to 2022Q4, capturing rational and behavioral behaviors with adjustments for Brazilian economic idiosyncrasies. Impulse response functions (IRF) assess the dynamic effects of policy shocks, providing a comparative analysis of the two frameworks. Findings: Behavioral agents show greater initial sensitivity to policy shocks, causing more pronounced fluctuations in GDP, inflation and private consumption compared to rational agents. Over time, the behavioral approach leads to a more robust recovery, while the rational approach results in a quicker return to equilibrium but less pronounced long-term recovery. The study also finds fiscal policy can partially offset the negative impacts of monetary tightening, with a more delayed effect in the behavioral model. Originality/value: This paper provides insights into the interplay between monetary and fiscal policies under different agent expectations, emphasizing the importance of incorporating behavioral elements into macroeconomic models to better capture policy dynamics in emerging markets.
Subjects: 
Bayesian estimates
Bounded rationality
Macroeconomic indicators
New Keynesian DSGE model
JEL: 
C11
D84
E52
E62
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article

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