Fiscal policy in times of crisis: macroeconomic effects of the primary surplus

The international financial crisis that hit the Brazilian economy in the third quarter of 2008 called forth several economic-policy responses. In the case of fiscal policy, expansionary measures rendered the existing fiscal target unviable, and it was formally reduced in April 2009. The purpose of this article is to analyse the macroeconomic effects of reducing the primary budget-surplus target and to evaluate its repercussions on the level of activity, time-structure of interest rates and the exchange rate.