The pattern of fiscal policy in developing economies: there is a trap of procyclical fiscal policy?

• Grant number: 13/07326-9
• Support Opportunities: Scholarships abroad - Research Internship - Doctorate
• Start date: September 01, 2013
• End date: August 31, 2014
• Field of knowledge: Applied Social Sciences - Economics - Growth, Fluctuations and Economic Planning
• Principal Investigator: Fabiana Fontes Rocha
• Grantee: Carlândia Brito Santos Fernandes
• Supervisor: Albert Fishlow
• Host Institution: Faculdade de Economia, Administração e Contabilidade (FEA). Universidade de São Paulo (USP). São Paulo , SP, Brazil
• Institution abroad: Columbia University in the City of New York, United States
• Associated to the scholarship: 12/04600-0 - The pattern of Brazilian fiscal policy and the role of fiscal responsibility law, BP.DR

Abstract

At the start of the research project in the country "The Pattern of Brazilian Fiscal Policy and the Role of Fiscal Responsibility Law," was noted that it would be interesting to develop a model to represent the pattern of fiscal policy in developing countries . In the international literature there is a consensus that developing countries adopt pro-cyclical fiscal policies, while developed countries typically adopt countercyclical fiscal policies. The model indicates, in fact, the existence of a pro-cyclical fiscal trap in developing countries. Therefore, it was decided to continue the research towards finding empirical evidence that supported the results of the theoretical model. The objective is to conduct empirical analysis for the period 1980 to 2010, using panel data on the pattern of fiscal policy in developing countries and its relationship with the level of development as well as to investigate the existence of pro-cyclical fiscal trap and identify the countries that composes it. Furthermore, we intend to improve the investigation and understanding of the results of the project of scholarship in the country, pointing that Brazilian fiscal policy is countercyclical, i.e, opposite to that which would exist for developing countries. Considering that unusual technique was used for this evaluation (unobservable components or structural model of Harvey) is important greater investment in this methodology and if the results are confirmed, the identification of factors that led to the change in the behavior of the Brazilian fiscal policy. (AU)