Topics in Fiscal Policy: Theory, evidence and the case of Brazil

Course: Topics in Fiscal Policy: Theory, evidence and the case of Brazil
Workload: 30h
Prerequisite: Macroeconomics II
Professor: Marco A.F.H. Cavalcanti

Course Overview: Fiscal policy from a macroeconomic perspective and the Brazilian fiscal challenge. Basic concepts and indicators for fiscal policy analysis. Macroeconomic stabilization and the keynesian fiscal multiplier. Fiscal policy from a neoclassical perspective. Output effects of fiscal consolidation episodes. Long-run effects of fiscal policy. Interactions between fiscal and monetary policy (I): The "conventional" case. Empirical evidence on fiscal multipliers. Fiscal policy, inflation and the public debt. Interactions between fiscal and monetary policy (II): Fiscal dominance and the Fiscal Theory of the Price Level. Public debt dynamics and sustainability analysis. The political economy of fiscal policy, the deficit bias and fiscal rules. The Brazilian case (I): overview. The Brazilian case (II): Fiscal policy and fiscal rules from 2016 to 2023. The Brazilian case (III): The new fiscal framework and the road ahead.

Mandatory Bibliography:
Lectures slides.
Chapters/sections from [lectures slides will list the required chapters/sections for each class]: Abbas et al. (2020). Sovereign Debt: A Guide for Economists and Practitioners, Oxford Univ. Press.
Abel, A.; Bernanke, B. and Croushore, D. (2017). Macroeconomics. Ninth edition, Pearson. Alesina, A. et al. (2019). Effects of Austerity: Expenditure- and Tax-based Approaches. Journal of Economic Perspectives, 33 (2).
Alesina, A.; Ardagna, S. Tales of fiscal adjustment. Economic Policy, n. 13, v. 27, p. 498‐545, 1998.
Blanchard, O. (2021). Fiscal Policy Under Low Interest Rates. Book draft.
Blanco, F. et al. (2020). Fiscal Rules and Economic Size in Latin America and the Caribbean.
Latin American Development Forum. Washington, DC: World Bank.
Burnside, C. (2005). Fiscal sustainability in theory and practice: a handbook. The World Bank.
Chinn, M. (2013). Fiscal multipliers. The New Palgrave Dictionary of Economics.
Cochrane, J. H. (2021). The Fiscal Theory of the Price Level. Book draft.
Coenen, G. et al. (2012). Effects of Fiscal Stimulus in Structural Models. American Economic Journal: Macroeconomics, 4(1).
Eyraud, L. et al. (2018). Second-Generation Fiscal Rules: Balancing Simplicity, Flexibility, and Enforceability. IMF Staff Discussion Notes SDN/18/04.
Eyraud, L. et al. (2018b). How to select fiscal rules: a primer. IMF Fiscal Affairs Department (FAD) How-To Notes.
Gale, W. e P. Orszag (2004). Budget Deficits, National Saving, and Interest Rates. Brookings Papers on Economic Activity, 2004, 2, pp. 101-210.
Herrera, S. e E. Olaberria (2020). Budget Rigidity in Latin America and the Caribbean: Causes, Consequences, and Policy Implications. World Bank Group.
IMF (2008). Fiscal Policy as a Countercyclical Tool. World Economic Outlook, Chapter 5, October.
Izquierdo, A. et al. (2018). Better Spending for Better Lives: How Latin America and the Caribbean Can Do More with Less. Inter-American Development Bank.
Lee, V. and L. Sheiner (2019). What are automatic stabilizers? Brookings Series: The Hutchins Center Explains.
Leeper, E. (2010). Monetary science, fiscal alchemy. NBER Working Paper 16510.
Leeper, E. (2016). Why central banks should care about fiscal rules. Sveriges Riksbank Economic Review, 2016:3.
Medas et al. (2020). Strengthening Fiscal Responsibility at the Subnational Level. IMF Technical Report.
Ramey, V. (2011). Can Government Purchases Stimulate the Economy? Journal of Economic Literature, 49 (3).
Ramey, V. (2019). Ten Years After the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research? Journal of Economic Perspectives, 33 (2).
Yared, P. (2019). Rising Government Debt: Causes and Solutions for a Decades-Old Trend. Journal of Economic Perspectives, 33 (2).