Nonlinearities between Fiscal and Monetary PoliciesThe Nexus between Public Debt and Interest Rates in Brazil

Resumo

This article evaluates the nexus between public debt and short-term interest rates in Brazil for monthly data spanning from 2003/01 to 2022/10. Two econometric techniques are employed in the estimations: i) the Threshold Autoregressive Approach (TAR) and, ii) Markov Switching Regime Regression (MSRR). The results for both methods suggest that the relationship between public debt and short-term interest rates is non-linear. TAR models suggest that when public debt is taller than 71% of GDP, the country performs in weak monetary dominance. That is, when the public indebtedness achieves this level, the Central Bank reacts by raising the Selic rate. The models of Transition of Markovian Regimes indicate that from these indebtedness points, the effects of debt on interest rates intensify. As robustness, additional estimations are made considering the LTNs rates, in the case the tipping point estimated was 73% of GDP.

Ficha do documento

Tipo

Artigo científico

Ano

2026

Instituição

EGV EPGE

Fonte

Revista Brasileira de Economia

Idioma

Inglês

Acesso

Não informado

Identificador

oai:ojs.periodicos.fgv.br:article/93856

Abrangência

Não se aplica

Temas

EconomiaFinanças Públicas

Palavras-chave

Weak Monetary PolicyAutoregressive ThresholdsMarkov switchingMacroeconomiaPolítica EconômicaPolítica MonetáriaPolítica FiscalCoordenação