Abstract
Fiscal policy should be contractionary during economic expansion and expansionary during recessions. The objective of this article is to investigate the nature of long-term discretionary fiscal policy in Brazil in relation to the level of economic activity and the terms of trade. A fiscal policy variable without cyclical effects was chosen, and the results of the cointegration analysis indicate that long-term fiscal policy is destabilizing; this findings parallels those in the literature. However, in regard to trade cycles, this policy prevents their amplification.
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