APPENDIX A - Anticipated and unanticipated fiscal shocks in an estimated DSGE model for the bra

TABLE A.1

Calibrated values for model parameters¹

Parameter Description Value

Size of the non-ricardian population 0.6600

Absolute value of the elasticity of the marginal utility of consumption with

respect to consumption 1.2000

Elasticity of the marginal disutility of labor with respect to labor 2.0000

Intertemporal discount factor 0.9875

Sensitivity of the risk premium with respect to the debt/output ratio 1.1000

Depreciation rate of the private capital stock 0.0200

Depreciation rate of the public capital stock 0.0200

Degree of habit formation of individuals in the economy 0.6500 Measure of the convexity of function S, which imposes costs to the

adjust-ment of the capital stock 0.1500

Parameter that characterizes function Ψ, which imposes a cost to the economy whenever the rate of utilization of private capital departs from its

steady-state level 5.9200

Proportion of firms in the tradable goods sector that are unable to choose

optimal prices in a given period 0.5000

Proportion of firms in the non-tradable goods sector that are unable to

choose optimal prices in a given period 0.5000

Proportion of ricardian individuals who are unable to choose optimal wages

in a given period 0.6000

Exponent of capital in the Cobb-Douglas production function used by

inter-mediate goods firms pertaining to the tradable sector of the economy 0.4250 Exponent of labor in the Cobb-Douglas production function used by

inter-mediate goods firms pertaining to the tradable sector of the economy 0.4000 Exponent of capital in the Cobb-Douglas production function used by

inter-mediate goods firms pertaining to the non-tradable sector of the economy 0.2500 Exponent of labor in the Cobb-Douglas production function used by

inter-mediate goods firms pertaining to the non-tradable sector of the economy 0.6500

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Parameter Description Value

Parameter that measures the degree of substitution between the different

kinds of labor supplied by ricardian individuals 0.5000

Sensitivity of total factor productivity of intermediate goods firms with

respect to public capital 0.0500

Parameter that measures the degree of substitution between the labor

aggregates supplied by ricardian and non-ricardian individuals 5.0000 Parameter that measures the importance of tradables goods in the

produc-tion funcproduc-tion used by firms manufacturing the final good 0.3200 Parameter that measures the degree of substitution between tradable and

non-tradable aggregates in the production of the final good 2.0000 Parameter that measures the importance of ricardian labor in the labor

aggregate used by intermediate goods firms 0.6500

Parameter that measures the degree of substitution between the various

kinds of tradable goods used in the production of the tradable aggregate 0.1000 Parameter that measures the degree of substitution between the various

kinds of non-tradable goods used in the production of the non-tradable

aggregate 0.2000

Sensitivity of the foreign demand for tradable goods manufactured in the

domestic economy with respect to its relative price 10

Authors’ elaboration.

Note: ¹ The calibration was based on Cavalcanti et al. (2019).

(Continued)

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TABLE A.2

Steady-state ratios for main macroeconomic aggregates¹

Parameter Description Value

Ratio between total consumption and the gross domestic product (GDP) 0.82 Ratio between total private consumption and GDP 0.62 Ratio between total ricardian consumption and GDP 0.35 Ratio between total non-ricardian consumption and GDP 0.27 Ratio between total government consumption and GDP 0.21 Ratio between pure government spending (purchases of goods

and services) and GDP 0.07

Ratio between the real value of the payroll of public servants and GDP 0.13

Ratio between aggregate investment and GDP 0.18

Ratio between private investment and GDP 0.16

Ratio between public investment and GDP 0.02

Ration between total domestic absorption and GDP 1.00 Ratio between the real value of exports and GDP 0.10 Ratio between the real value of imports and GDP 0.10

Real labor income as a proportion of GDP 0.53

Real labor income paid by the private sector as a proportion of GDP 0.40 Real labor income paid by the public sector as a proportion of GDP 0.13 Real labor income received by non-ricardian workers as a proportion

of GDP 0.15

Real labor income received by ricardian workers as a proportion of GDP 0.38

Real capital income as a proportion of GDP 0.31

Excise taxes + import taxes as a proportion of GDP 0.16 Social transfers received by non-ricardian individuals as a proportion

of GDP 0.16

(Continues)

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Parameter Description Value

Taxes levied on labor income as a proportion of GDP 0.12 Taxes levied on capital income as a proportion of GDP 0.07

Lump-sum taxes as a proportion of GDP 0.01

Ratio between the outputs of the tradable and non-tradable sectors 0.78

Capital stock as a proportion of GDP 2.28

Source: Cavalcanti et al. (2019).

Authors’ elaboration.

FIGURE A.1

Univariate convergence diagnosis

(Continued)

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(Continued)

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(Continues) (Continued)

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Source: Brooks and Gelman (1998).

Authors’ elaboration.

Publisher’s note: Figure displayed in low resolution and whose layout and texts could not be formatted and proofread due to the technical characteristics of the original files.

(Continued)

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TABLE A.3

Results of estimating the standard deviation of fiscal shocks

Parameter Description Prior distribution Posterior distribution

Distribution Mean Variance Median Cred. interval (90%) Standard deviation of the

unanticipated shock to

govern-ment consumption Invgamma 0.2000 inf 0.0107 0.0066 0.0146

Standard deviation of the anticipated shock to

government consumption Invgamma 0.2000 inf 0.0103 0.0061 0.0141

Standard deviation of the

unantici-pated shock to public investment Invgamma 0.1000 inf 0.0994 0.0781 0.1219 Standard deviation of the

antici-pated shock to public investment Invgamma 0.1000 inf 0.0517 0.0265 0.0749 Standard deviation of the

unanticipated shock to public

sector employment Invgamma 0.0500 inf 0.0119 0.0092 0.0145

Standard deviation of the anticipated shock to public sector

employment Invgamma 0.0500 inf 0.0120 0.0093 0.0146

Standard deviation of the

unantici-pated public sector wage shock Invgamma 0.0100 inf 0.0078 0.0025 0.0145 Standard deviation of the

antici-pated public sector wage shock Invgamma 0.0500 inf 0.0225 0.0178 0.0275 Standard deviation of the

unanticipated shock of

consumption taxation Invgamma 0.0060 inf 0.0196 0.0143 0.0251

Standard deviation of the unan-ticipated shock of taxation of the

salary of the ricardian agent Invgamma 0.0500 inf 0.0601 0.0511 0.0691 Standard deviation of the

unanticipated shock of transfers

to non-ricardians Invgamma 0.0500 inf 0.0172 0.0122 0.0221

Standard deviation of the anticipated shock of transfers

to non-ricardians Invgamma 0.0500 inf 0.0171 0.0119 0.0223

Standard deviation of the anticipated shock of transfers

to working non-ricardians Invgamma 0.0500 inf 0.0047 0.0017 0.0080

Standard deviation of the anticipated shock of transfers

to working non-ricardians Invgamma 0.0500 inf 0.0036 0.0012 0.0062

Standard deviation of the

unantici-pated lump-sum taxation shock Invgamma 0.0100 inf 0.0092 0.0023 0.0172 Standard deviation of the

antici-pated lump-sum taxation shock Invgamma 0.0100 inf 0.0085 0.0024 0.0157 Source: Results obtained with Dynare package.

Authors’ elaboration.

DISCUSSION PAPER DISCUSSION PAPER

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TABLE A.4

Results of estimating the standard deviation of measurement errors

Parameter Description

Prior distribution Posterior distribution Distribution Mean Variance Median Cred. Interval

(90%) Standard deviation of the

inflation measurement error of the

tredables sector Invgamma 0.010 inf 0.0290 0.0251 0.0329

Standard deviation of the inflation measurement error in the non

tred-ables sector Invgamma 0.010 inf 0.0222 0.0191 0.0253

Standard deviation of the wage index

measurement error Invgamma 0.010 inf 0.0274 0.0234 0.0313

Standard deviation of the measure-ment error of the salary of

non-ricard-ian individuals who work Invgamma 0.010 inf 0.0268 0.0202 0.0329

Standard deviation of the error of measurement of the salary of

ricardian individuals Invgamma 0.010 inf 0.0204 0.0175 0.0231

Standard deviation of the real

ex-change rate measurement error Invgamma 0.010 inf 0.0814 0.0604 0.1022 Standard deviation of

consumption measurement error of

ricardian individuals Invgamma 0.010 inf 0.0347 0.0297 0.0393

Standard deviation of the measure-ment error of the stock of external securities in the portfolio of ricardian individuals

Invgamma 0.010 inf 0.0081 0.0024 0.0146

Rest of the world production

measure-ment error standard deviation Invgamma 0.010 inf 0.0050 0.0043 0.0057 Standard deviation of the rest of the

world’s inflation measurement error Invgamma 0.010 inf 0.0015 0.0012 0.0018 Standard deviation of the error in

measuring the level of employment in

the economy Invgamma 0.010 inf 0.0125 0.0101 0.0149

Standard deviation of the measure-ment error of consumption of

non-ri-cardian individuals Invgamma 0.010 inf 0.0112 0.0074 0.0152

Standard deviation of the wage tax

rate measurement error Invgamma 0,0050 inf 0.1295 0.1113 0.1470

Source: Results obtained with Dynare package.

Authors’ elaboration.

DISCUSSION PAPER

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TABLE A.5

Results of estimating the standard deviation of “structural” shocks and shocks on external variables

Parameter Description Prior distribution Posterior distribution

Distribution Mean Variance Median Cred. Interval (90%) Standard deviation of preference

shock Invgamma 0.0500 inf 0.0473 0.0397 0.0547

Shock standard deviation in leisure

preference Invgamma 0.0050 inf 0.0046 0.0011 0.0089

Standard deviation of the risk

premi-um shock Invgamma 0.0050 inf 0.0037 0.0031 0.0042

Standard deviation of investment

shock Invgamma 0.0500 inf 0.0440 0.0374 0.0520

Standard deviation of the tradables

sector productivity shock Invgamma 0.0050 inf 0.0038 0.0012 0.0067

Standard deviation of the

non-trad-ables sector productivity shock Invgamma 0.0070 inf 0.0107 0.0061 0.0156 Standard deviation of the monetary

shock Invgamma 0.0050 inf 0.0029 0.0024 0.0033

Standard deviation of the shadow

price of capital Invgamma 0.0100 inf 0.0171 0.0021 0.0229

Standard deviation of the shock on the rate of depreciation of private

capital Invgamma 0.0100 inf 3.5073 3.0315 3.9966

Standard deviation of the shock in the rate of depreciation of public

capital Invgamma 0.0100 inf 0.0095 0.0023 0.0173

Standard deviation of the shock in

commodity production Invgamma 0.0100 inf 0.0108 0.0022 0.0209

Standard deviation of the shock in the international commodity price

index Invgamma 0.0100 inf 0.0976 0.0839 0.1108

Standard deviation of the external

interest rate shock Invgamma 0.0050 inf 0.0072 0.0054 0.0090

Standard deviation of the shock on

G20 CPI Invgamma 0.0100 inf 0.0092 0.0023 0.0175

Standard deviation of the inflation

shock in the rest of the world Invgamma 0.0050 inf 0.0013 0.0010 0.0015 Standard deviation of the shock on

the tax rate levied abroad on exports Invgamma 0.0500 inf 0.4000 0.1992 0.6633 Standard deviation of the shock of

the level of international economic

activity Invgamma 0.0100 inf 0.2675 0.2268 0.3062

Source: Results obtained with Dynare package.

Authors’ elaboration.

DISCUSSION PAPER DISCUSSION PAPER

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TABLE A.6

Results of estimating the parameters of the fiscal reaction function

Parameter Description Prior distribution Posterior distribution

Distribution Mean Variance Median Cred. Interval (90%) Persistence of government

consumption Beta 0.5000 0.1000 0.8293 0.7675 0.8914

Persistence of public investment Beta 0.5000 0.1000 0.7941 0.7309 0.8621 Persistence of employment in the

public sector Beta 0.5000 0.1000 0.7902 0.7210 0.8602

Persistence of public sector

salary Beta 0.5000 0.2000 0.8629 0.8145 0.9106

Persistence of transfers for

work-ing non-ricardians Beta 0.5000 0.1000 0.9462 0.9188 0.9741

Persistence of transfers to

non-ri-cardians Beta 0.5000 0.1500 0.4479 0.3051 0.5897

Persistence of the consumption

tax rate Beta 0.5000 2.0000 0.4047 0.2289 0.5815

Persistence of the tax rate levied

on the wages of ricardians Beta 0.5000 0.1000 0.4819 0.3514 0.6129

lump sum tax persistence Beta 0.5000 0.1000 0.5010 0.3278 0.6632

Sensitivity of government consumption to changes in the

debt/GDP ratio Norm 0.2000 0.0500 0.0125 0.0052 0.0196

Sensitivity of public investment

to changes in the debt/GDP ratio Norm 0.2000 0.0500 0.0197 0.0117 0.0278 Sensitivity of public sector

em-ployment to changes in the debt/

GDP ratio Norm 0.2000 0.0500 0.0212 0.0132 0.0293

Sensitivity of public sector wages

to changes in the debt/GDP ratio Norm 0.2000 0.0500 0.0131 0.0049 0.0213 Source: Results obtained with Dynare package.

Authors’ elaboration.

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TABLE A.7

Results of estimating the parameters of persistence of “structural” shocks

Parameter Description Prior distribution Posterior distribution

Distribution Mean Variance Median Cred. Interval (90%) Parameter that measures the

persistence of the ricardian

preference shock Beta 0.5000 0.1000 0.3085 0.1975 0.4122

Parameter that measures the persistence of the shock in

leisure preference Beta 0.5000 0.1000 0.4888 0.3311 0.6516

Parameter that measures the

per-sistence of the risk premium shock Beta 0.5000 0.1000 0.8844 0.8406 0.9294 Parameter that measures the

per-sistence of the shock in the

adjust-ment cost of the capital stock Beta 0.5000 0.2000 0.3003 0.1891 0.3958 Parameter that measures the

per-sistence of the productivity shock in

the tradables sector Beta 0.5000 0.1000 0.4625 0.3025 0.6249

Parameter that measures the per-sistence of the productivity shock of

the non-tradables sector Beta 0.5000 0.0700 0.5211 0.4114 0.6325

Parameter that measures the per-sistence of the shock in the external

interest rate Beta 0.5000 0.1000 0.8729 0.8190 0.9261

Parameter that measures the persistence of the shock in the general price index for products from the “rest of the world”

Beta 0.5000 0.1000 0.4851 0.3326 0.6323

Parameter that measures the per-sistence of the inflation shock

in G20 Beta 0.5000 0.1000 0.6538 0.5295 0.7792

Parameter that measures the

per-sistence of the shock in G20 GDP Beta 0.5000 0.1000 0.5045 0.3777 0.6331 Parameter that measures the

persistence of the shock in the

inter-national commodity price index Beta 0.5000 0.2000 0.9442 0.9176 0.9722 Source: Results obtained with Dynare package.

Authors’ elaboration.

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TABLE A.8

Estimation results for selected parameters

Parameter Description

Prior distribution Posterior distribution Distribution Mean Variance Median Cred. Interval

(90%) Parameter that measures the

sensitivity of the risk premium to

changes in the debt/GDP ratio Norm 0.0500 0.0100 0.0315 0.0162 0.0462 Parameter that measures the

loss arising from variations in

installed capacity Gamm 5.9200 5.0000 3.2124 2.7323 3.6893

Parameter that measures the

persistence of monetary policy Beta 0.5000 0.1000 0.8319 0.7912 0.8736 Parameter that measures the

monetary policy response to devi-ations in output from the balanced growth path

Gamm 0.5000 0.2000 0.0133 0.0100 0.0172

Parameter that measures the monetary policy response to inflation deviations from the established target

Gamm 2.0000 0.5000 0.3056 0.2501 0.3568

Parameter that measures the degree of indexation of prices in the

tradable sector Beta 0.5000 0.2000 0.5332 0.2255 0.8502

Parameter that measures the degree of price indexation in the

non-tradables sector Beta 0.5000 0.2000 0.5819 0.3063 0.8850

Parameter that measures the degree of indexation of the wages

of ricardians Beta 0.5000 0.2000 0.4467 0.1932 0.6940

Source: Results obtained with Dynare package.

Authors’ elaboration.

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FIGURE A.2

Source: Results obtained with Dynare package.

Historical decomposition of interest rate variation

Source: Results obtained with Dynare package.

Authors’ elaboration.

Publisher’s note: Figure displayed in low resolution and whose layout and texts could not be formatted and proofread due to the technical characteristics of the original files.

REFERENCES

BROOKS, S.; GELMAN, A. General methods for monitoring convergence of iterative simulations.

Journal of Computational and Graphical Statistics, v. 7, n. 4, p. 434-455, 1998.

CAVALCANTI, M. A. F. H. et al. Impactos macroeconômicos do choque fiscal de 2015: a regu-larização de despesas públicas não contabilizadas. Revista Brasileira de Economia, v. 73, n. 4, p. 489-527, out.-dez. 2019.

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