Title Brazil : selected issues

Published Washington, D.C. : International Monetary Fund, 2016 ©2016

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Description 1 online resource (159 pages) : color illustrations Series IMF Country Reports ; no. 16/349 IMF country report ; no. 16/349. Contents Financial business cycles in Brazil -- Consumption in Brazil: where to next? -- Fiscal challengtes of an aging population in Brazil -- Stretching the limits: the evolution of subnational public finances in Brazil -- Effectiveness of intervention in Brazil -- Upgrading Brazil's inflation-targeting framework -- Assessing banking sector health in the economic downturn Summary Assessing banking sector health in the economic downturn: This paper assesses the health of the banking sector under different scenarios. We use a balance sheet approach and publicly available data to assess the solvency risk of the largest six banks in Brazil. The results of the analysis suggest that those banks will cope well in the baseline scenario from the July 2016 IMF World Economic Outlook. However, some banks may temporarily fall below the regulatory threshold in the stress scenario characterized by a longer and deeper recession along with a large increase in funding costs Consumption in Brazil: where to next?: Private consumption has been a key driver of growth in Brazil for more than a decade. Over this time, Brazilian consumers have benefited from a favorable policy environment, a rapid phase of development--dramatically increasing economic, financial and social inclusion--and a supportive external environment. Meanwhile, infrastructure gaps have widened and investment and productivity levels have fallen behind. The consumption-led growth model now appears to have run its course. The prospect of a period of macroeconomic adjustment presents an opportunity to adjust policy settings to ensure macroeconomic adjustment presents an opportunity to adjust policy settings to ensure stronger, more balance and sustainable growth over the medium term. -- Effectiveness of intervention in Brazil: Unconventional monetary policies in advanced economies and volatile capital flows in and out of emerging markets have brought foreign exchange intervention (FXI) back to the forefront of the policy debate. Following the global financial crisis, policymakers argued that unconventional policies in developed economies were causing lending booms in developing economies and threatened their competitiveness. More recently, net capital flows to emerging markets have slowed and turned negative in some instances amid uncertainty about the pace of policy tightening in major advanced economies (IMF, 2016). While flexible exchange rate regimes have facilitated more orderly currency adjustments than during past slowdowns, intervention has been an important part of the policy response, aimed at smoothing the adjustment, avoiding disorderly market conditions or defending against a perceived overshooting. -- Financial business cycles in Brazil: This paper assesses the importance of financial market developments for the business cycle in Brazil. The results underscore the importance of macro-financial linkages and highlight risks to the recovery going forward. They also show that offsetting the negative effects of a slowdown in private credit with an expansion in public credit can be costly, potentially leading to inefficiencies that are difficult to unwind. -- Fiscal challengtes of an aging population in Brazil: In recent decades, the elderly population has doubled in Brazil while pension and health related spending has increased in per capita terms and as a share of GDP. As the demographic profile changes, spending on health and pension will increase to unsustainable levels absent reforms to benefits. These reforms should start as soon as possible, so that they can be implemented gradually to ensure sustainability and population endorsement. -- Stretching the limits: the evolution of subnational public finances in Brazil: This annex documents the ongoing subnational fiscal crisis in Brazil. It looks at the evolution of subnational public finances since 2003, and provides evidence that while present stresses have a strong cyclical component arising from the recession, in some states current liquidity problems are symptomatic of deeper structural problems jeopardizing medium-term sustainability. In particular, during the past decade personnel costs followed a steep upward trend in many states, and revealed themselves to be unsustainable during the sharp deterioration of growth and revenues in 2015-16. Going forward, the federal governments and subnational entities need to collaborate and undertake a comprehensive reform of personnel and age-related social expenditures, together with a reform of the ICMS tax, to put subnational public finances in order. -- Upgrading Brazil's inflation-targeting framework: Brazil was one of the early adopters of an inflation target in 1999. Its framework has proved resilient and inflation has stabilized at significantly lower rates than in previous decades. Since then, lessons from international research and the experience from other inflation-targeting countries have shown that it is possible to achieve better inflation and growth outcomes by enhancing central bank credibility and transparency. Brazil's experience also suggests that there could be room for improvement, as both inflation and inflation expectations have often deviated from the mid-point of the target range, increasing the cost of disinflation. This paper discusses how Brazil could upgrade its inflation-targeting framework in terms of its design, analytical framework and effectiveness of central bank communication. Central bank independence is the top priority, but Brazil could also benefit from adopting an inflation-forecast targeting framework. Whereas this paper focuses on monetary policy, a systematically consistent policy mix is also important to secure better inflation and growth outcomes. -- Notes "November 2016." "October 14, 2016; approved by Western Hemisphere Department; prepared by C. Góes, I. Karpowicz, T. Matheson (all WHD), I. Krznar (MCM), C. Mulas-Granados (FAD), S. Domit, D. Laxton and J. Mongardini (RES), C. Saborowski (SPR)"--Page 2 of pdf Bibliography Includes bibliographical references Notes Description based on online resource; title from pdf title page (IMF.org website, viewed December 12, 2016) Subject International Monetary Fund -- Brazil SUBJECT International Monetary Fund. fast (OCoLC)fst00556666 Subject Aging -- Economic aspects -- Brazil Banks and banking -- Brazil Business cycles -- Brazil Consumption (Economics) -- Brazil Credit -- Brazil Fiscal policy -- Brazil Foreign exchange administration -- Brazil Inflation targeting -- Brazil Infrastructure (Economics) -- Brazil Medical economics -- Brazil Monetary policy -- Brazil Subnational governments -- Economic aspects -- Brazil Aging -- Economic aspects. Banks and banking. Business cycles. Consumption (Economics) Credit. Fiscal policy. Foreign exchange administration. Inflation targeting. Infrastructure (Economics) Medical economics. Monetary policy. Brazil. Form Electronic book Author Domit, Silvia, author. Goes, Carlos, author. Karpowicz, I. (Izabela), author. Krznar, Ivo, author. Laxton, Douglas, author. Matheson, Troy, author. Mongardini, Joannes, 1970- author. Mulas-Granados, Carlos, author. Saborowski, Christian, author. International Monetary Fund, issuing body. International Monetary Fund. Western Hemisphere Department, issuing body. ISBN 1475553226 9781475553222

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