Luciane Cristina Carvalho

This analyzes monetary and fiscal policies applied in Brazil from 2001 to 2012, by the theory of coordination of economic policies. The discussion within the literature about the necessity of policy coordination excels price stability and social well-being for the long run. Therefore, this study introduces the concepts of economic coordination, as well as the forms and structures that can be used as tools for the purpose of coordinating policies. Moreover, monetary coordination is addressed having as the primary instrument of transmission at interest rate, determined by the monetary policy committee - COPOM in Brazil, and fiscal policy having as main goal the primary surplus. It was considered that the coordination of macroeconomic policies on national markets is a necessary condition obtaining and maintaining common goals. However, the economic literature has not yet reached a consensus on this condition. During 2001 and 2012, the Brazilian economy registered relevant monetary, fiscal and exchange rate policy changes, going through phases of abrupt monetary and fiscal constraint, moderate, low and of seeking new restrictions via the management of the interest rate to achieve fiscal and monetary targets assumed with the domestic and foreign market. Verifying the interactions between fiscal and monetary policy, the structural vector autoregression model (SVAR) was applied to Brazil with the traditional monetary variables and fiscal ones over the determination of the interest rates. The government expenses and current revenues ratio and a new indicator of fiscal policy efficiency were used in the estimations. The results show there is policy coordination, but the welfare costs are high. Likewise, the results suggest that monetary policy is subordinated to fiscal policy.