Abstract
This study investigates the sustainability of Brazilian states’ public finances with quarterly revenue and expenses data from 2006 to 2020, aimed at the identification of groups of states that share similar patterns. The technique adopted is a panel data model that avoids mistaken inferences by controlling for cross-dependence among states. We find two clear patterns, from which we identify a fiscally sustainable group of only 9 states and an unsustainable group, comprising the remaining ones.
Keywords:
Cross-dependence panel methods; fiscal sustainability; Brazilian states public debt
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Source: Central Bank of Brazil
Source: The Brazilian public sector accounting and fiscal information system (Siconfi).
Source: Own elaboration based on data from Siconfi https://siconfi.tesouro.gov.br/siconfi/index.jsfAt the beginning of the sample period (2006-2008), we observed a slight increase in revenue of the states, which remained stable from 2009 to 2017, growing back in the following period, especially in 2019, due to the increase in tax collection. Expenses were clearly more volatile than revenue and exhibited a mildly upward trajectory in most states from 2015 to 2019. Finally, some states had deficits in a large part of the study period, like Acre, Minas Gerais, Rio de Janeiro, Rio Grande do Sul and São Paulo, while other states showed a balance between revenue and expenses, like Espírito Santo, Federal District and Pará.