Vol. 42 No. 3 (2022)
Jul-Sep / 2022
Published August 17, 2022
How to Cite
Campos, Eduardo Lima, Rubens Penha Cysne, and Alexandre L. Madureira. 2022. “A Further Deterioration of the Brazilian Fiscal Reaction in View of COVID-19”. Brazilian Journal of Political Economy 42 (3):664-77. https://doi.org/10.1590/0101-31572022-3286.
A further deterioration of the Brazilian fiscal reaction in view of COVID-19
Abstract
The fiscal reaction function measures how the government’s primary surplus
reacts to the evolution of public debt. Campos and Cysne (2019b) observed that the
reaction function has been almost steadily decreasing since 2012 and it has turned from
positive to negative values in 2017 and 2018. In the subsequent period, the improvement
of some economic indicators led the fiscal reaction to a recovery. Nevertheless, in 2020,
with the advent of COVID-19, health spending and emergency aids caused a sharp fiscal
deterioration, leading the fiscal reaction coefficient to assume, again, negative values.
JEL Classification: H30; H60; E50.
Keywords: Brazil fiscal reaction COVID-19 Debt/GDP ratio fiscal sustainability Kalman filter