O Public debt service and financial fragility: evidence for brazilian states
Abstract
Objective: The objective of this study was to evaluate the causal relationship between current expenditures and debt service in the financial fragility of Brazilian states, considering the theoretical assumptions of the Financial Fragility Hypothesis Applied to the Public Sector.
Method: PVAR modeling for panel data was used, based on the Generalized Method of Moments (GMM). The Hansen, Andrews and Lu and model stability tests were carried out. The data was obtained from the website of the National Treasury Secretariat, and the sample included the 27 units of the Brazilian federation from 2013 to 2017.
Originality/Relevance: This study fills gaps in the analysis of the financial fragility of subnational entities, showing whether it is formed by debt service, according to the theory of financial fragility, or by the fiscal imbalance between current revenue and expenditure. In this way, it assesses whether there is a causal relationship between current expenditure and debt service in the financial fragility of Brazilian states.
Theoretical/methodological/practical Contributions: The econometric evidence broadened the discussions not only regarding financial fragility in the public sector, but also corroborated previous studies. The evidence responded to the research problem and broadens the debate on financial fragility applied to the public sector, specifically with regard to Brazilian states, contributing to the understanding of fiscal, economic and even budgetary aspects.
Downloads
References
Andrews, Donald W. & Lu, Biao. (2001). Consistent model and moment selection procedures for GMM estimation with application to dynamic panel data models. Journal of econometrics, v. 101, n. 1, p. 123-164.
Arellano, Manuel; Bond, Stephen. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The review of economic studies, v. 58, n. 2, p. 277-297.
BARRO, R. (1979). On the determination of the public debt. Journal of Political Economy 87 (5), 940-71.
Blundell, Richard; Bond, Stephen. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of econometrics, v. 87, n. 1, p. 115-143.
Caríssimo, C. R.; Carvalho, E. G.; Carvalho, F. D. M.; Aveline, C. E. S. (2019). Análise da Hipótese de Fragilidade Financeira Aplicada ao Setor Público por Meio de Equações Estruturais. In.: XIX USP International Conference in Accounting. Anais...São Paulo.
De Paula, L. F. R. & Alves Jr, A. J. (2000). External financial fragility and the 1998-1999 Brazilian currency crisis. Journal of Post Keynesian Economics, 22(4), 589-617.
Ferrari-Filho, F; Terra, F.H.B. & Conceição, O.A.C. (2010). The financial fragility hypothesis applied to the public sector: an analysis for Brazil’s economy from 2000 to 2008. Journal of Post Keynesian Economics, vol. 33, n. 1, 151-168.
Foley, D. (2003). Financial fragility in developing economies. DUTT, Amitava K.; ROSS, Jaime. Development economics and structuralist macroeconomics. Cheltenham: Edward Elgar, 157-168.
Gujarati, Damodar N. & Porter, Dawn C. (2011). Econometria básica-5. AMGH Editora: Porto Alegre.
Granger, Clive WJ. (1969). Investigating causal relations by econometric models and cross-spectral methods. Econometrica: journal of the Econometric Society, p. 424-438.
Hansen, Lars Peter. (1982). Large sample properties of generalized method of moments estimators. Econometrica: Journal of the Econometric Society, p. 1029-1054.
Holtz-Eakin, Douglas; Newey, Whitney & Rosen, Harvey S. (1988). Estimating vector autoregressions with panel data. Econometrica: Journal of the econometric society, p. 1371-1395.
Koengkan, Matheus. (2017). The nexus between energy consumption, economic growth, and urbanization in Latin American and Caribbean countries: An approach with PVAR model. Revista Valore, v. 2, n. 2, p. 202-219.
Love, Inessa & Zicchino, Lea. (2006). Financial development and dynamic investment behavior: Evidence from panel VAR. The Quarterly Review of Economics and Finance, v. 46, n. 2, p. 190-210.
Medeiros, Victor & Ribeiro, Rafael Saulo Marques. (2020). Power infrastructure and income inequality: Evidence from Brazilian state-level data using dynamic panel data models. Energy Policy, v. 146, p. 111734.
Minsky, H. P. (1977). The financial instability hypothesis: An interpretation of Keynes and an alternative to “standard” theory. Challenge, 20(1), 20-27.
______. (1985). The legacy of Keynes. The Journal of Economic Education, 16(1), 5-15.
______. (1986). Stabilizing an Unstable Economy. Twentieth Century Fund Report: New Heaven.
______. (1992). The Financial Instability Hypothesis. The Jerome Levy Economics Institute Working Paper No. 74. May.
_______. (2013). Estabilizando uma economia instável. Novo Século: Osasco.
Morettin, Pedro A. (2011). Econometria financeira: um curso em séries temporais financeiras. Editora Blucher.
Musgrave, R. A. (1973). Teoria das finanças públicas: um estudo de economia Governamental. Atlas: São Paulo.
Passos Filho, A. C. (2018). O endividamento dos estados brasileiros: uma análise de sustentabilidade e dos instrumentos de controle. Dissertação de mestrado. 120 p. Universidade de São Paulo.
Pesaran, H. M. et al. (2004). General diagnostic tests for cross-sectional dependence in panels. University of Cambridge, Cambridge Working Papers in Economics, v. 435.
Picolotto, V. D. C. (2016). Política fiscal e endividamento público em um contexto de estado subnacional: uma perspectiva pós-keynesiana para o Rio Grande do Sul no período 1995-2014.
Schaltegger, C. A., & Weder, M. (2014). Fiscal adjustment and the costs of public debt service: evidence from OECD countries. APPLIED ECONOMICS, 46(22), 2593–2610.
Seixas, Flávio Henrique De S.& Da Silva, Cleomar Gomes. (2016). Um estudo sobre o crescimento da receita pública e sua relação causal com a despesa no Estado de Goiás. Ensaios FEE, v. 37, n. 1, p. 187-216.
Silva, Cleomar Gomes da et al. (2010). Receitas e gastos governamentais: uma análise de causalidade para o caso brasileiro. Economia Aplicada, v. 14, n. 4, p. 265-275.
Sigmund, Michael & Ferstl, Robert. (2019). Panel Vector Autoregression in R with the package panelvar. The Quarterly Review of Economics and Finance.
Sweeney, Dennis J.; Williams, Thomas A.& Anderson, David R. (2013). Estatística aplicada à administração e economia. São Paulo, CENGAGE Learning.
Taylor, L.& O'connell, S. A. (1985). A Minsky crisis. The Quarterly Journal of Economics, 100(Supplement), 871-885.
Terra, F. H. B& Ferrari Filho, F. (2011). A hipótese de fragilidade financeira aplicada ao setor público: uma análise para a economia brasileira no período de 2000-2009, Revista Economia, v. 12, n. 3, p. 497-516.
Terra, F. H. B.& Ferrari Filho, F. (2020). Public Sector Financial Fragility Index: an analysis of the Brazilian federal government from 2000 to 2016. Journal of Post Keynesian Economics, 1-25.
Triches, Divanildo; Bertussi, Luis Antônio Sleimann. (2017). Multicointegração e sustentabilidade da política fiscal no Brasil com regime de quebras estruturais (1997-2015). Revista Brasileira de Economia, v. 71, n. 3, p. 379-394.
Zivot E. & Wang, J. (2005). Modeling financial time series with S-plus. 2. ed. New York: Springer.
DECLARATION OF ORIGINALITY AND COPYRIGHTS
I Declare that current article is original and has not been submitted for publication, in part or in whole, to any other national or international journal.
The copyrights belong exclusively to the authors. Published content is licensed under Creative Commons Attribution 3.0 (CC BY 3.0) guidelines, which allows sharing (copy and distribution of the material in any medium or format) and adaptation (remix, transform, and build upon the material) for any purpose, even commercially, under the terms of attribution.
Read this link for further information on how to use CC BY 3.0 properly.
