Fiscal policies for public debt stabilization: a general equilibrium approach applied to Brazil

Authors

DOI:

https://doi.org/10.1590/0101-41615011ota

Keywords:

fiscal policy, public debt, dynamic general equilibrium, growth models

Abstract

We used a deterministic dynamic applied general equilibrium model with a representative agent
to evaluate fiscal policy alternatives for Brazil. The changes in the fiscal mix that mostly increase
the long-run per-capita output (by about 2%) are: the reduction of government consumption
accompanied by the decrease of the capital income tax rate, and the increase of government
investment financed by the reduction of transfers. The former is also the one the produces
the largest increase in welfare. The public debt consolidation strategies considered used only
one fiscal instrument and aimed to reduce public debt by 10% in 10 years and its subsequent
stabilization. From the point of view of the level of consumption and of the level of capital
stock in the long run, and of the discounted flow of welfare, the best instrument was the tax
rate on capital income. From the point of view of output in the long-run, the best instrument
was government investment, followed by the tax rate on capital income.

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Author Biographies

  • Octavio Augusto Fontes Tourinho, Rio de Janeiro State University

    Professor Titular de Flutuações e Crescimento Econômico da Universidade Estadual do Rio de Janeiro desde 1995, na Faculdade de Ciências Econômicas e no Programa de Pós-Graduação em Ciências Econômicas.

  • Angelica Freire de Oliveira Brum, Rio de Janeiro State University

    Mestrado Ciências Econômicas - Programa de Pós-Graduação em Ciências Econômicas - Universidade Estadual do Rio de Janeiro, 2016.

     

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Published

30-03-2020

Issue

Vol. 50 No. 1 (2020)

Section

Articles

License

Copyright (c) 2020 Octavio Augusto Fontes Tourinho, Angelica Freire de Oliveira Brum

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

By submitting an article, the author authorizes its publication and attests that it has not been submitted to any other journal. The original article is considered final. Articles selected for publication are proofread for grammatical and orthographic errors. The journal does not pay rights for published articles. The Institute of Economic Research from the School of Economics, Business and Accounting of the University of São Paulo (Instituto de Pesquisas Econômicas da Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo) owns the journal's copyright.

How to Cite

Tourinho, O. A. F., & Brum, A. F. de O. (2020). Fiscal policies for public debt stabilization: a general equilibrium approach applied to Brazil. Estudos Econômicos (São Paulo), 50(1), 5-42. https://doi.org/10.1590/0101-41615011ota