An analysis of the zero nominal deficit proposal

Vol. 27 No. 4 (2007)

Oct-Dec / 2007
Published March 17, 2020
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Pires, Manoel Carlos de Castro. 2007. “An Analysis of the Zero Nominal Deficit Proposal”. Brazilian Journal of Political Economy 27 (4):651-63.

An analysis of the zero nominal deficit proposal

Manoel Carlos de Castro Pires
Técnico da coordenação de finanças públicas do IPEA e doutorando em economia da UnB.
Brazilian Journal of Political Economy, Vol. 27 No. 4 (2007), Oct-Dec / 2007, Pages 651-663


The aim of this paper is to evaluate the relationship between fiscal deficits and interest rate in Brazil. An adaptation of Taylor’s Rule is tested and the data confirmed this relationship. Furthermore, evidence from a loanable funds model shows that a lower deficit can bring interest rate down. However, policy coordination is a key feature in this process.

JEL Classification: E31, E52, E61.

Keywords: interest rate monetary policy fiscal policy