Fiscal rules and the effectiveness of monetary policy: Estimates for a large emerging economy<sup/>

Anjos, Daniel Pereira dos; Moreira, Ricardo Ramalhete

doi:10.5935/0034-7140.20220019

Acessibilidade / Reportar erro

Brasil

Revista Brasileira de Economia

Español English

Brasil

Español English

sumário « anterior atual seguinte »

Sumário

Original Article • Rev. Bras. Econ. 77 • 2023 • https://doi.org/10.5935/0034-7140.20220019 copy

Fiscal rules and the effectiveness of monetary policy: Estimates for a large emerging economy^* * This work was supported by the Coordination for the Improvement of Higher Education Personnel (CAPES) and the National Council for Scientific and Technological Development (CNPq).

Authorship SCIMAGO INSTITUTIONS RANKINGS

Abstract

This work evaluated the effect of fiscal policy on the effectiveness of monetary policy by the Central Bank of Brazil. Using monthly data from January-2003 to January-2020, a test was conducted to gauge how the cyclicality degree of the fiscal policy-in light of the variations in the public debt-affected the variability of the short-term real interest rate. To this goal, we extracted a fiscal response index from an unobservable state variable using the Kalman filter. Applying the cointegration method and GMM estimation, the results revealed that the smoothing and effectiveness of monetary policy depend on the degree of fiscal responsiveness to the level of public indebtedness.

JEL Codes E31, H30, H63

Keywords
monetary policy; fiscal policy; fiscal rules; public debt

VARIABLES	MEAN	MEDIAN	MAXIMUM	MINIMUM	S.D.
PS _t	1.469	2.180	4.080	-3.040	2.215
DEB _t	67.872	64.520	88.780	57.030	9.039
E[PS]_t	2.009	2.800	4.300	-2.210	2.189
SELIC _t	6.972	6.620	19.180	0.450	4.001
IPCA _t	0.469	0.430	2.200	-0.270	0.307
E[IPCA]_t	5.189	5.230	11.560	3.330	1.231
IBCBR _t	130.237	135.710	148.660	99.030	13.773
EXCH _t	72.222	71.790	122.830	48.910	15.208
PIMPF _t	92.811	91.300	105.000	77.500	7.223

VARIABLES	ADF	PP	KPSS
PS _t	-2.059	-1.207	0.232^***
DEB _t	0.795	0.826	0.415^***
E[PS]_t	-2.864	-2.351	0.258^***
SELIC _t	-3.896^**	-1.678^*	0.240^***
IPCA _t	-8.701^***	-8.644^***	0.147^**
E[IPCA]_t	-3.731^***	-5.211^***	0.212^**
IBCBR _t	-2.082^*	-2.311	0.412^***
EXCH _t	-1.943	-2.971^**	0.411^***
PIMPF _t	-2.036	-2.115	0.381^*

VARIABLES	ADF	PP	KPSS
D(PS_t)	-3.574^***	-13.012^***	0.133
D(EB_t)	-2.133^**	-19.029^***	0.064
D(E[PS]_t)	-2.944^***	-11.716^***	0.134
D(IBCBR_t)	-8.274^***	-13.744^***	0.072
DEXCH_t)	-5.610^***	-11.774^***	0.070
D(PIMPF_t)	-16.385^***	-16.353^***	0.245

		OLS Estimation:
Explanatory variables	Model 1.1	Model 1.2	Specifications Model Model 1.3 1.4		Model 1.5	Model 1.6
c	-1.538^ significant at 5%; (0.624) [-2.464]	-1.540^ significant at 5%; (0.622) [-2.475]	-0.738^* ***** significant at 1%. (0.448) [-1.645]	-2.750^* ***** significant at 1%. (0.598) [-4.594]	-2.724^* ***** significant at 1%. (0.589) [-4.622]	-1.792^* ***** significant at 1%. (0.470) [-3.814]
PS_t-1	0.909^* ***** significant at 1%. (0.040) [22.347]	0.908^* ***** significant at 1%. (0.039) [22.842]	0.963^* ***** significant at 1%. (0.027) [35.578]	0.878^* ***** significant at 1%. (0.037) [23.525]	0.877^* ***** significant at 1%. (0.037) [23.724]	0.969^* ***** significant at 1%. (0.021) [45.438]
DEB_t-1	0.015^* ***** significant at 1%. (0.004) [3.817]	0.015^* ***** significant at 1%. (0.004) [3.817]	0.010^* ***** significant at 1%. (0.003) [3.112]	0.021^* ***** significant at 1%. (0.003) [5.518]	0.020^* ***** significant at 1%. (0.003) [5.529]	0.015^* ***** significant at 1%. (0.003) [4.318]
E[PS]_t-1	0.076^ significant at 5%; (0.037) [2.056]	0.078^ significant at 5%; (0.034) [2.253]	-	0.100^* ***** significant at 1%. (0.029) [3.387]	0.102^* ***** significant at 1%. (0.028) [3.604]	-
IBCBR_t-1	0.004 (0.002) [1.602]	0.004^* * significant at 10%; (0.002) [1.628]	0.001 (0.001) [0.574]	-	-	-
IPCA_t-1	0.011 (0.047) [0.242]	-	0.031 (0.046) [0.680]	0.025 (0.042) [0.611]	-	0.047 (0.043) [1.094]
PIMPF_t-1	-	-	-	0.014^* ***** significant at 1%. (0.003) [3.923]	0.014^* ***** significant at 1%. (0.003) [3.927]	0.009^* ***** significant at 1%. (0.002) [3.255]
DUMMY_F_t	-0.337^* ***** significant at 1%. (0.115) [-2.919]	-0.333^* ***** significant at 1%. (0.120) [-2.777]	-0.317^ significant at 5%; (0.125) [-2.536]	-0.304^* ***** significant at 1%. (0.108) [-2.806]	-0.296^* ***** significant at 1%. (0.111) [-2.661]	-0.284^* ***** significant at 1%. (0.121) [-2.340]
Adjusted R²	0.990	0.990	0.990	0.991	0.991	0.990
AIC	-0.222	-0.289	-0.207	-0.180	-0.302	-0.249
ADF test	-4.942^* ***** significant at 1%.	-4.969^* ***** significant at 1%.	-5.200^* ***** significant at 1%.	-4.762^* ***** significant at 1%.	-4.813^* ***** significant at 1%.	-4.848^* ***** significant at 1%.
LM (p-value)	0.413	0.382	0.468	0.378	0.238	0.000

GMM Estimation: D(SELIC)_t
Explanatory Variables	Specifications
Explanatory Variables	Model 2.1	Model 2.2	Model 2.3	Model 2.4
c	1.306^* * significant at 10%; (0.731) [1.785]	1.167^* ***** significant at 1%. (0.628) [2.664]	1.847^* ***** significant at 1%. (0.757) [2.438]	1.277^* * significant at 10%; (0.715) [1.784]
D(SELIC)_t-	0.766^* ***** significant at 1%. (0.086) [8.855]	1.017^* ***** significant at 1%. (0.155) [6.529]	0.843^* ***** significant at 1%. (0.064) [13.035]	0.862^* ***** significant at 1%. (0.073) [11.788]
D(E[IPCA]_t-1)	0.828^* ***** significant at 1%. (0.177) [4.671]	1.227^* ***** significant at 1%. (0.276) [4.437]	0.880^* ***** significant at 1%. (0.240) [3.652]	1.136^* ***** significant at 1%. (0.239) [4.742]
IBCBR_GAP_t-1	0.028^ significant at 5%; (0.001) [2.006]	-0.017 (0.019) [-0.931]
D(EXCH)_t-2	0.001 (0.002) [0.055]		0.031 (0.056) [1.175]
FR _t-1	-1.359^* ***** significant at 1%. (0.757) [-1.795]	-1.720^* ***** significant at 1%. (0.655) [-2.626]	-1.191^* ***** significant at 1%. (0.785) [-2.436]	-1.320^* * significant at 10%; (0.746) [-1.768]
Adjusted R²	0.381	0.342	0.373	0.346
J stat (p-value)	0.339	0.405	0.404	0.261

Lag	AIC	SIC	HQ
0	17.224	17.358	17.278
1	5.275	5.675^* * indicates the optimal lag in accordance with the information criterion.	5.437^* * indicates the optimal lag in accordance with the information criterion.
2	5.179	5.846	5.449
3	5.151^* * indicates the optimal lag in accordance with the information criterion.	6.085	5.529
4	5.242	6.442	5.728
5	5.322	6.788	5.915
6	5.213	6.946	5.914
7	5.171	7.171	5.981
8	5.242	7.509	6.160

Data trend None None			Linear Linear Quadratic
Rank or No intercept Intercept			Intercept Intercept Intercept
No. of CEs No trend No trend			No trend Trend Trend
	Akaike information criterion by rank (lines) and model (columns)
0	5.445	5.445	5.405	5.405	5.441
1	5.346	5.333	5.291	5.206	5.234
2	5.327	5.323	5.280	5.204^* * indicates the most parsimonious specification.	5.223
3	5.354	5.336	5.331	5.243	5.252
4	5.431	5.408	5.408	5.324	5.324
	Schwarz information criterion by rank (lines) and model (columns)
0	5.445	5.445	5.470	5.470	5.571
1	5.476	5.479	5.486	5.417^* * indicates the most parsimonious specification.	5.494
2	5.587	5.616	5.605	5.562	5.613
3	5.744	5.775	5.787	5.747	5.773
4	5.951	5.993	5.993	5.975	5.975

		Trace Test
No. of cointegrations	Eigenvalue	Trace Statistic	Critical value 0.05		p-value^ MacKinnon-Haug-Michelis (1999) p-value.
None ^* * indicates rejection of the hypothesis at 5%;	0.249	88.382	63.876		0.000
Up to 1	0.086	29.830	42.915		0.512
Up to 2	0.048	11.450	25.872		0.848
Up to 3	0.006	1.403	12.517		0.993
	Maximum Eigenvalue Test
No. of cointegrations	Eigenvalue	Critical value Max-Eigen Stat 0.05			p-value^ MacKinnon-Haug-Michelis (1999) p-value.
None ^* * indicates rejection of the hypothesis at 5%;	0.249	58.552		32.118	0.000
Up to 1	0.086	18.376		25.823	0.349
Up to 2	0.048	10.050		19.387	0.613
Up to 3	0.006	1.403		12.517	0.993

Cointegrated Equation
PS(-1)	1.000
DEB(-1)	-0.578^* ***** significant at 1%. (0.077) [-7.487]
E[PS](-1)	0.493 (0.468) [1.051]
IBCBR(-1)	-0.502^* ***** significant at 1%. (0.096) [-5.207]
C	85.274

Error Correction Model	D(PS)	D(DEB)	D(E[PS)	D(IBCBR)
	-0.040^* ***** significant at 1%.	0.157^* ***** significant at 1%.	-0.030^* ***** significant at 1%.	-0.057
Short-run coefficients	(0.006)	(0.035)	(0.006)	(0.035)
	[-5.909]	[ 4.385]	[-4.659]	[-1.584]

VARIABLES	ADF	PP	KPSS
SELIC _t	-2.596	-1.498	0.193^**
E[IPCA]_t	-1.039	-0.984	0.206
IBCBR_GAP_t	-4.162^***	-3.872^***	0.035
EXCH _t	-2.290	-2.128	0.369^*
FR _t	-3.348^**	-3.217^**	0.322^***

VARIABLES	ADF	PP	KPSS
D(SELIC_t)	-5.504^***	-8.084^***	0.058
D(E[IPCA]_t)	-11.283^***	-12.263^***	0.108
D(EXCH_t)	-5.322^***	-11.294^***	0.075

Fundação Getúlio Vargas Praia de Botafogo, 190 11º andar, 22253-900 Rio de Janeiro RJ Brazil, Tel.: +55 21 3799-5831 , Fax: +55 21 2553-8821 - Rio de Janeiro - RJ - Brazil
E-mail: rbe@fgv.br

Acompanhe os números deste periódico no seu leitor de RSS

[1] ✉ danielpereiraanjos@hotmail.com ✉ ricardo.moreira@ufes.br

Brasil

Brasil

Fiscal rules and the effectiveness of monetary policy: Estimates for a large emerging economy* * This work was supported by the Coordination for the Improvement of Higher Education Personnel (CAPES) and the National Council for Scientific and Technological Development (CNPq).

Abstract

Fiscal rules and the effectiveness of monetary policy: Estimates for a large emerging economy^* * This work was supported by the Coordination for the Improvement of Higher Education Personnel (CAPES) and the National Council for Scientific and Technological Development (CNPq).