The imbalance of the Brazilian public sector: alternative scenarios

Vol. 7 No. 3 (1987)

Jul-Sep / 1987
Published July 1, 1987
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Braga, Carlos Alberto Primo, John H. Welch, and Paulo de Tarso Afonso de André. 1987. “The Imbalance of the Brazilian Public Sector: Alternative Scenarios”. Brazilian Journal of Political Economy 7 (3):299-311. https://doi.org/10.1590/0101-31571987-3005.

The imbalance of the Brazilian public sector: alternative scenarios

Carlos Alberto Primo Braga
Faculdade de Economia e Administração da Universidade de S. Paulo – FEA/USP, São Paulo, Brasil.
John H. Welch
Universidade de Illinois em Urbana-Charnpaign, Champaign, IL, Estados Unidos
Paulo de Tarso Afonso de André
Fundação Instituto de Pesquisas Econômicas da Universidade de S. Paulo - FIPE/USP, São Paulo, Brasil.
Brazilian Journal of Political Economy, Vol. 7 No. 3 (1987), Jul-Sep / 1987, Pages 299-311

Abstract

The Brazilian public sector disequilibrium, as measured by growth in the global
net public sector debt to GDP ratio, is examined with and without the “Plano Cruzado”.
Two models are used, one based upon a discrete time framework and the other based upon a
continuous time framework, to trace paths of the debt-GDP ratio for the rest of the decade
concentrating on the 1985-1990 period. Two major conclusions are reached. The first, of a
theoretical nature, is that discrete-time models are inappropriate in an inflationary context
as they severely underestimate the inflation tax. The second is that the Plano Cruzado may
put strong pressure on government finances due to the drastic fall in the inflation tax.

JEL Classification: H63; E31.


Keywords: Cruzado plan public debt