We find historical fiscal multipliers for Brazil around 0.5, larger than what existing literature typically identifies for the average emerging market. However, spending and public credit multipliers seem to have dropped to near zero since the global financial crisis, as the estimate for the whole sample period (1999-2014) is about 1⁄2 of that for precrisis years. By contrast, revenue multipliers have remained broadly stable. We conclude that fiscal consolidations based on expenditure and public credit retrenchment are likely to entail a modest drag on growth in the near term.

This paper uses the strategy and data of Blanchard and Perotti (BP) to identify fiscal shocks and estimate fiscal multipliers for the United States. With these results, it computes the cumulative multiplier of Ramey and Zubairy (2018), now common in the literature. It finds that, contrary to the peak and through multipliers reported by BP, the cumulative tax multiplier is much larger than the cumulative spending one. Hence, the conclusions depend on the definition of multiplier. This methodology is also used to estimate the effects of fiscal shocks on economic activity in eight Latin American countries. The results suggest that the fiscal multipliers vary significantly across countries, and in some cases multipliers are larger than previously estimated.

This Selected Issues paper examines infrastructure investment in Brazil. Brazil has inferior overall infrastructure quality relative to almost all its export competitors. Brazil’s infrastructure endowment ranks low by international standards, and its low quality affects productivity, market efficiency, and competitiveness. Areas in which Brazil’s competitiveness has lagged include, but are not limited to, education, innovation, governance, and justice. Brazil’s infrastructure gap has become a major obstacle to growth and filling this gap will entail increasing investment and also stepping up other reforms.

This Selected Issues paper examines infrastructure investment in Brazil. Brazil has inferior overall infrastructure quality relative to almost all its export competitors. Brazil’s infrastructure endowment ranks low by international standards, and its low quality affects productivity, market efficiency, and competitiveness. Areas in which Brazil’s competitiveness has lagged include, but are not limited to, education, innovation, governance, and justice. Brazil’s infrastructure gap has become a major obstacle to growth and filling this gap will entail increasing investment and also stepping up other reforms.

Despite the development of fiscal responsibility legislation, several weaknesses in fiscal transparency have had adverse effects on the quality of fiscal policy—many of which are being addressed. Brazil has made significant progress over recent decades in providing regular information on the budget and its implementation at all levels of government, partly driven by the 2000 Fiscal Responsibility Law (FRL). These include advances in implementing international standards to improve the quality of data. At the same time, fiscal transparency has been undermined by weaknesses in the fiscal framework and by practices that are inconsistent with the principles of the FRL (including unreported liabilities, the “pedaladas”). These include: incomplete information on policies and their costs or risks; accounting changes, and lack of clarity on fiscal reporting standards, that undermine the effectiveness of the fiscal rules (at all levels of government); lack of transparency in the relationship between the central government and public banks and between the central government and subnational governments; and corruption involving some of the largest public enterprises. Since 2015, important efforts have been underway to address some of these weaknesses.