Abstract
This paper analyzes the relationship between government spending and private consumption in Brazil through an application of a VAR with time-varying parameters and stochastic volatility, estimated with Bayesian simulation over the 1996:Q1–2014:Q2 period. The findings reveal that fiscal policy is indeed effective in stimulating GDP and private consumption, which characterizes the presence of positive Keynesian multipliers. However, these positive effects are only sustained on the shortrun. Also, stochastic volatility seems to have decreased from 2000 onwards, suggesting that Brazil has steadily improved its macroeconomic stability after the adoption of the inflation-targeting framework and the Fiscal Responsibility Law.
Keywords:
Government Spending; Private Consumption; TVP-VAR
Notes: Shaded area corresponds to Luiz Inácio “Lula” da Silva 1st and 2nd terms as president; government spending (GS), private consumption (PC) and GDP are all expressed in real per capita terms and seasonally adjusted; short-term interest rate is measured in nominal, annual terms.Sources: Brazilian Institute of Geography and Statistics (IBGE) and Brazilian Central Bank (BCB).
Notes: Shaded area corresponds to Luiz Inácio “Lula” da Silva 1st and 2nd terms as president; government spending growth rate (gGS), private consumption growth rate (gPC) and GDP growth rate (gGDP) are all measured as the percent rate of increase in their respective real per capita values.Sources: Compiled by the authors.
Notes: Sample autocorrelations (top), sample paths (middle) and posterior densities (bottom).
Notes: The terms gGS, gPC and gGDP refer to government spending, private consumption and GDP growth rates, respectively. DSTIR is the short-term interest rate in its first difference. Only median responses are reported. Posterior mean (solid line) and 95% credible intervals (dotted line).
Notes: The terms gGS, gPC and gGDP refer to government spending, private consumption and GDP growth rates, respectively. DSTIR is the short-term interest rate in its first difference. Only median responses are reported. Posterior mean (solid line) and 95% credible intervals (dotted line).
Notes: The terms gGS, gPC and gGDP refer to government spending, private consumption and GDP growth rates, respectively. DSTIR is the short-term interest rate in its first difference. Only median responses are reported.
Notes: The terms gGS, gPC and gGDP refer to government spending, private consumption and GDP growth rates, respectively. DSTIR is the short-term interest rate in its first difference. Posterior mean (solid line) and 95% credible intervals (dotted line).
Notes: The terms gGS, gPC and gGDP refer to government spending, private consumption and GDP growth rates, respectively. DSTIR is the short-term interest rate in its first difference. Only median responses are reported.
Notes: Sample autocorrelations (top), sample paths (middle) and posterior densities (bottom).
Notes: Sample autocorrelations (top), sample paths (middle) and posterior densities (bottom).
Notes: The terms gGS, gPC and gGDP refer to government spending, private consumption and GDP growth rates, respectively. DSTIR is the short-term interest rate in its first difference. Only median responses are reported. Posterior mean (solid line) and 95% credible intervals (dotted line).
Notes: The terms gGS, gPC and gGDP refer to government spending, private consumption and GDP growth rates, respectively. DSTIR is the short-term interest rate in its first difference. Only median responses are reported. Posterior mean (solid line) and 95% credible intervals (dotted line).
Notes: The terms gGS, gPC and gGDP refer to government spending, private consumption and GDP growth rates, respectively. DSTIR is the short-term interest rate in its first difference. Only median responses are reported. Posterior mean (solid line) and 95% credible intervals (dotted line).
Notes: The terms gGS, gPC and gGDP refer to government spending, private consumption and GDP growth rates, respectively. DSTIR is the short-term interest rate in its first difference. Only median responses are reported. Posterior mean (solid line) and 95% credible intervals (dotted line).