Empirical Evidence on the Relation between Fiscal Credibility and Central Bank Credibility: The Brazilian case

Montes, Gabriel; Oliveira, Ana Jordânia de; Nicolay, Rodolfo

doi:10.1590/0101-41614914gar

Gabriel Montes

Professor - Universidade Federal Fluminense (UFF) - Endereço: Rua Alexandre Moura, Bloco F, 8 São Domingos - Niterói/RJ - Brasil - CEP: 24210-200 - E-mail: gabrielmontesuff@yahoo.com.br

http://orcid.org/0000-0001-8687-2114

Ana Jordânia de Oliveira

Professor - Universidade Candido Mendes - Endereço: Rua da Assembléia, 10 - Sala 319 Rio de Janeiro/RJ - Brasil - CEP: 20119-900 - E-mail: anajordaniaoliveira@gmail.com

http://orcid.org/0000-0002-8668-9245

Rodolfo Nicolay

Professor - Universidade Candido Mendes - Endereço: Rua da Assembléia, 10 - Sala 319 - Rio de Janeiro/RJ - Brasil - CEP: 20119-900 - E-mail: r-nicolay@hotmail.com

http://orcid.org/0000-0003-1325-5136

Null Hypothesis:	Obs	F-Statistic	Prob.
CBCI does not Granger Cause FCI	166	1.13	0.35
FCI does not Granger Cause CBCI		4.46	0.00

	OLS	GMM	TOBIT
CONSTANT	0.435	0.173	0.356^* * denotes 0.1. Coefficients in bold, standard errors in parentheses and t-statistics in square brackets. Regarding OLS estimates, due to the problems of autocorrelation and heteroscedasticity, the reported t-statistics in the OLS estimates are based on the estimator of Newey and West (1987).
	(0.301)	(0.234)	(0.190)
	[1.447]	[0.741]	[1.871]
PSBR (-1)	-0.032	-0.051^* ***** denotes 0.01,	-0.058^* ***** denotes 0.01,
	(0.020)	(0.016)	(0.011)
	[-1.581]	[-3.081]	[-5.354]
AMD (-1)	0.011^ denotes 0.05 and	0.013^* ***** denotes 0.01,	0.016^* ***** denotes 0.01,
	(0.005)	(0.003)	(0.003)
	[2.287]	[3.780]	[5.165]
INDEX (-1)	0.004^* ***** denotes 0.01,	0.005^* ***** denotes 0.01,	0.003^* ***** denotes 0.01,
	(0.001)	(0.001)	(0.001)
	[3.303]	[4.320]	[5.354]
IR (-1)	-0.017^ denotes 0.05 and	-0.009	-0.029^* ***** denotes 0.01,
	(0.008)	(0.007)	(0.005)
	[-1.987]	[-1.260]	[-6.114]
ΔGDP (-1)	-0.067	-0.259	-0.305
	(0.394)	(0.291)	(0.254)
	[-0.169]	[-0.889]	[-1.204]
R²	0.915	0.899
R² Adjusted	0.913	0.895
F- Statistic (p-valor)	0.000
Left Censored Obs			0
Right Censored Obs			49
Uncensored Obs			110
Residual and Stability Diagnostics
Ramsey-RESET(1) (p-value)	0.000
Jarque-Bera (p-value)	0.005
ARCH(1) (p-value)	0.000
ARCH(2) (p-value)	0.000
LM(1) (p-value)	0.000
LM(2) (p-value)	0.000
Durbin-Wu-Hausman (p-value)		0.998
J-Statistc (p-value)		0.101
Instrument Rank		19

	OLS	GMM	TOBIT
CONSTANT	0.014	-0.024	0.014
	(0.257)	(0.157)	(0.135)
	[0.055]	[-0.154]	[0.105]
INFD (-1)	-0.033^* * denotes 0.1. Coefficients in bold, standard errors in parentheses and t-statistics in square brackets. Regarding OLS estimates, due to the problems of autocorrelation and heteroscedasticity, the reported t-statistics in the OLS estimates are based on the estimator of Newey and West (1987).	-0.055^* ***** denotes 0.01,	-0.033^* ***** denotes 0.01,
	(0.017)	(0.009)	(0.009)
	[-1.931]	[-6.204]	[-3.516]
IR (-1)	0.027^ denotes 0.05 and	0.033^* ***** denotes 0.01,	0.027^* ***** denotes 0.01,
	(0.012)	(0.007)	(0.006)
	[2.275]	[4.451]	[4.228]
D_ER (-1)	-0.620^* ***** denotes 0.01,	-1.822^* ***** denotes 0.01,	-0.621^* ***** denotes 0.01,
	(0.191)	(0.311)	(0.1558)
	[-3.248]	[-5.861]	[-3.983]
FCI(-1)	0.152	0.259^ denotes 0.05 and	0.152^* * denotes 0.1. Coefficients in bold, standard errors in parentheses and t-statistics in square brackets. Regarding OLS estimates, due to the problems of autocorrelation and heteroscedasticity, the reported t-statistics in the OLS estimates are based on the estimator of Newey and West (1987).
	(0.176)	(0.103)	(0.090)
	[0.866]	[2.520]	[1.684]
ΔGDP (-1)	2.556^* ***** denotes 0.01,	1.454^* ***** denotes 0.01,	2.556^* ***** denotes 0.01,
	(0.660)	(0.401)	(0.374)
	[3.874]	[3.629]	[6.838]
R²	0.484	0.274
R² Adjusted	0.468	0.251
F- Statistic (p-valor)	0.000
Left Censored Obs			0
Right Censored Obs			0
Uncensored Obs			169
Residual and Stability Diagnostics
Ramsey-RESET(1) (p-value)	0.069
Jarque-Bera (p-value)	0.167
ARCH(1) (p-value)	0.000
ARCH(2) (p-value)	0.000
LM(1) (p-value)	0.000
LM(2) (p-value)	0.000
Durbin-Wu-Hausman (p-value)		0.859
J-Statistc (p-value)		0.321
Instrument Rank		19

	Equation 1			Equation 2
	Dependent Variable: FCI			Dependent Variable: CBCI
CONSTANT	0.141		CONSTANT	0.025
	(0.211)			(0.136)
	[0.665]			[0.181]
NFSP (-1)	-0.048^* ***** denotes 0.01,		INFD (-1)	-0.057^* ***** denotes 0.01,
	(0.013)			(0.007)
	[-3.638]			[-8.004]
AMD (-1)	0.016****		IR (-1)	0.030^* ***** denotes 0.01,
	(0.003)			(0.006)
	[4.754]			[4.890]
INDEX (-1)	0.004^* ***** denotes 0.01,		D_ER (-1)	-2.046^* ***** denotes 0.01,
	(0.001)			(0.321)
	[4.552]			[-6.369]
IR (-1)	*-0.013^ * denotes 0.1. Coefficients in bold, standard errors in parentheses and t-statistics in square brackets.**		FCI(-1)	0.225^ denotes 0.05 and
	(0.007)			(0.087)
	[-1.916]			[2.568]
ΔGDP (-1)	0.091		ΔGDP (-1)	1.339^* ***** denotes 0.01,
	(0.255)			(0.368)
	[0.355]			[3.641]
R²	0.907			0.182
R² Adjusted	0.904			0.156
J-Statistic		0.171
Prob (J-Statistic)

CBCI = \{\begin{matrix} 1 \\ 1 - \frac{1}{π_{t}^{*} - π_{t}^{T}} [E [π] - π_{t}^{T}] \\ 0 \end{matrix} \begin{matrix} if E [π] = π_{t}^{T} \\ if π_{tMIN}^{*} < E [π] < π_{tMAX}^{*} \\ if E (π) \geq π_{tMAX}^{*} or E [π] \leq π_{tMIN}^{*} \end{matrix}\}

FCI = \{\begin{matrix} 1 \\ 1 - \frac{1}{{debt}_{t}^{Max} - {debt}_{t}^{Min}} [E_{t} ({debt}_{t + 12}) - {debt}^{Min}] \\ 1 \end{matrix} \begin{matrix} if, E_{t} ({debt}_{t + 12}) \leq {debt}^{Min} \\ if, π_{tMin}^{*} < E_{t} ({debt}_{t + 12}) < {debt}^{Max} \\ if, E_{t} ({debt}_{t + 12}) \geq {debt}^{Max} \end{matrix}\}

System = \{\begin{matrix} {FCI}_{t} = α_{1} + α_{2} {PSBR}_{t - 1} + α_{3} {AMD}_{t - 1} + α_{4} {INDEX}_{t - 1} + α_{5} {IR}_{t - 1} + α_{6} Δ {GDP}_{t - 1} + ε_{t} \\ {CBCI}_{t} = β_{1} + β_{2} {INFD}_{t - 1} + β_{3} {IR}_{t - 1} + β_{4} D_{ER}_{t - 1} + β_{5} Δ {GDP}_{t - 1} + β_{6} {FCI}_{t - 1} + v_{t} \end{matrix}

	ADF				PP				KPSS
Series	Leg Lenght	Forma	Teste	10%	Bandwidth	Forma	Teste	10%	Forma	Bandwidth	Teste	1%
AMD	22	I/T	-3.43	-3.14	3.08	I/T	-3.36	-3.14	I/T	44.7	0.14	0.22
D_EXCH	10	I/T	-5.49	-3.14	0.661	N	-9.18	-1.62	I/T	4.88	0.14	0.22
PSBR	9	I	-3.59	-2.58	2.61	N	-1.36	-1.62	I/T	47.1	0.15	0.22
∆GDP	13	I	-3.16	-2.58	8	N	-1.95	-1.62	I	10	0.26	0.74
INDEX	12	I	-3.38	-2.58	0.429	N	-1.62	-1.62	I	141	0.42	0.74
INF_DEV	13	I/T	-1.60	-3.14	7.33	N	-2.25	-1.62	I	60.7	0.15	0.74
SELIC	13	I	-3.55	-2.58	20	N	-0.90	-1.62	I	129	0.38	0.74

Lag	AIC	SC	HQ
0	0.468	0.506	0.483
1	-16.691	-16.577	-16.644
2	-27.377	-27.188	-27.300
3	-33.000	-32.734	-32.892
4	-35.149	-34.808	-35.011
5	-35.803^* * indicates lag order selected by the criterion	-35.385^* * indicates lag order selected by the criterion	-35.633^* * indicates lag order selected by the criterion
6	-35.7780	-35.284	-35.578
7	-35.7584	-35.189	-35.527
8	-35.7281	-35.083	-35.466

Brasil

Brasil

Empirical Evidence on the Relation between Fiscal Credibility and Central Bank Credibility: The Brazilian case

Abstract