Fiscal Responsability: An Investigation into the Credibility of Brazilian Tax Policy after the LRF

Abstract

The Fiscal Responsibility Law (LRF) promulgation in 2000 was a milestone in the establishment of fiscal rules nationwide. The balance of public accounts and debt sustainability are necessary conditions for prolonged economic growth and, through the expectations of private agents, affect the economy's investment rate. The objective of the research was to verify whether, during the 20 years of the LRF, there is a perception of credibility in the Brazilian fiscal policy. For this, the VAR model was used to ascertain the behavior of private agents' expectations in relation to public debt and the primary result, obtained in the Focus report of the Central Bank (BACEN). As an additional contribution, it analyzed the effects of the expectations of these fiscal indicators on the investment rate. The results showed that these effects are relevant and suggest a compromise in the credibility of private agents in national fiscal policy in the analyzed period.