On the Time-Frequency Dynamics of Growth Cycles in Brazil

Abstract

We add to the empirical literature on growth, by addressing instrumentalized co-movements between growth versus fiscal, monetary, and credit variables in Brazil. We use partial wavelet coherency, phase-difference diagram, and regression coefficient to model growth cycles’ reaction to isolated fluctuations in net debt to GDP, primary balance to GDP, inflation, SELIC, household, and enterprise credit to GDP over time and across frequencies. We provide a set of new stylized facts about the history of growth in Brazil over the period from 2004q1 and 2022q4, during which the country has gone through three different recessions. We find that in the periods of expansion, primary balance cycles lead in-phase growth cycles, while inflationary and household credit cycles use to lead out-of-phase growth cycles. During the recessions, we find a relevant positive role played by the enterprise credit, and a negative leadership of SELIC cycles on economic growth cycles. JEL classification: C02, O42, H60