Déficit público e inflação: o caso brasileiro

Abstract

The purpose of this paper is to present some empirical subsidies to the discussion on the relation between public deficit and inflation in the Brazilian economy. An equilibrium rate of inflation is derived from model of public sector borrowing with exogenous deficit/GDP, a giving debt/GDP ratio and assuming a stable money demand function. The purpose of the model is to answer two questions: a) what is the inflation rate associated to a given level of the deficit/GDP ratio?; and b) what should be the target deficit/GDP ratio if the government wants to bring down inflation rates to the level of the seventies? Results show that: a) a deficit/GDP ratio higher than 4,0% leads to hyperinflation; and b) the deficit/ GDP ratio should be reduced to around 2,0% of GDP in order to reduce inflation to an annual rate of 10-20%.