TITLE:
Theoretical Analysis and Empirical Evidence of Countercyclical Macroeconomic Policies Implemented during the Subprime and COVID-19 Crises: The Brazilian Case
AUTHORS:
Eliane Araujo, Elisangela Araujo, Fernando Ferrari-Filho
KEYWORDS:
International Financial Crisis, COVID-19, Countercyclical Economic Policies, Brazil
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.3,
June
17,
2022
ABSTRACT: This article analyses, theoretically and
empirically, the countercyclical economic policies, in particular the fiscal
and monetary ones, implemented by the Brazilian Economic Authorities (BEAs) in
response to the International Financial Crisis (IFC), 2007-2008, and the
COVID-19 crisis, 2020. The main objective is to evaluate the effectiveness of
those policies not only in times of economic growth, but mainly in periods of
economic crisis. This idea is in line with the main arguments of Keynesian
macroeconomics, which supports the theoretical framework of the article. The
empirical analysis of the article shows the effects of fiscal (government
spending) and monetary (interest rate) policies in the Brazilian economy
between 1996 and 2020. Thus, it was estimated a MS-VAR model to analyze the
impacts of fiscal and monetary policies in periods of economic growth and
economic crisis. The main results indicate that the effects of fiscal and
monetary policies are more pronounced during a period of economic crisis than
in a situation of economic growth, supporting, thus, the Keynesian arguments
that fiscal and monetary policies are able to affect the economic cycles.