The New Fiscal Framework of the Brazilian Economy: Theory, Model, and Empirical Evidence of an (Un)sustainable Fiscal Regim by Guilherme Jonas Costa da Silva, Vitor Hugo Santos Pinto, Fernando Motta Correia published by International Review of Economic Policy (2024).
This paper aims to develop a mathematical model capable of representing the new fiscal framework of the Brazilian economy become possible to simulate its effects in different scenarios. Considering the model developed and the initial conditions presented by the government, it can be said that this fiscal rule is not sustainable, given that in the best scenario the debt ratio should reach the level of 84.01% in 2026, well above the established goals. Evidently, the results were sensitive to assumptions and parameters originally defined by the new framework, which must be rethought and recalibrated through procedures that scan the viable solutions until the one considered optimal to be found. Finally, the Brazilian economy is caught in a trap, since the success of the new framework depends on the growth acceleration of long-term, whose resources for its viability are insufficient for its realization and, to make matters worse, are being restricted by the fiscal rule itself.
