| Grant number: | 16/20245-6 |
| Support Opportunities: | Scholarships in Brazil - Post-Doctoral |
| Start date: | January 01, 2017 |
| End date: | October 31, 2017 |
| Field of knowledge: | Applied Social Sciences - Economics - Fiscal and Monetary Policies |
| Agreement: | Coordination of Improvement of Higher Education Personnel (CAPES) |
| Principal Investigator: | Gilberto Tadeu Lima |
| Grantee: | Rafael Saulo Marques Ribeiro |
| Host Institution: | Faculdade de Economia, Administração e Contabilidade (FEA). Universidade de São Paulo (USP). São Paulo , SP, Brazil |
Abstract This work aims to explore some aspects of the debate on setting an expenditure ceiling and the impact of such a policy on public debt sustainability from a more general theoretical framework in models of growth and distribution. We seek to demonstrate that a fiscal rule that merely sets an expenditure ceiling, excluding interest payments, may not be enough to ensure a non-explosive trajectory of the debt-GDP ratio over time. Having said that, we then suggest that a fiscal policy rule that takes into account not only an expenditure ceiling but also the activity level of the economy and that excludes public investment from the ceiling can be more effective with respect to the objective of stabilising the public debt. It is also argued that the Central Bank should take into account the expenditure ceiling set by the fiscal authority in its reaction function while managing monetary policy, thus ensuring greater stability to the system. Finally, we analyse the possibilities for empirical tests in order to assess whether the adoption of an expenditure ceiling by developing countries has been sufficient to ensure long-term debt sustainability. (AU) | |
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