O impacto dos gastos dos governos estaduais e municipais no déficit público e suas consequências

Abstract

This paper analyses the impacts of  state and county’s governmental expenditures on the Brazilian economy public deficit. Based on a macroenomic model it is shown that when federal government does not keep a tight grip on those expenditures, the economy follows a path of equilibrium with  controlled inflation but with unemployment, in the case of adopting  ala Cagan’s expectations. In the case of rational expectations equilibrium occurs with full employment and without inflation. The model also sheds light on the effects of  the ‘exchange rate anchorage’ on public deficit and on the dynamics of domestic debt. Finally,  the proposition of adopting a slower pace in the process of devaluating the exchange rate, in order to reduce the interest rate and  to enhance economic activity, is examined.