This paper investigates the sustainability of the fiscal policy in the state of Rio Grande do Sul for two periods: 1970 to 1997 and 1970 to 2003. From 1970 to 2003, the fiscal policy was characterized by primary deficits and the accumulation of public debt. Regardless of the deterioration of its tax situation, the State never determined the non-payment of its public debt, which suggests the sustainability of the fiscal policy during the two periods. Co-integration tests support the evidence of sustainability during the periods in question.
intertemporal budget equilibrium; co-integration tests; fiscal policy
