Pedro Gomes Vasconcelos and Nelson Leitão Paes
In an attempt to reduce tax distortions and increase economic efficiency, in 2002 and 2003 Brazil promoted changes in the PIS/COFINS tax, the main federal tax on consumption…
Abstract
Purpose
In an attempt to reduce tax distortions and increase economic efficiency, in 2002 and 2003 Brazil promoted changes in the PIS/COFINS tax, the main federal tax on consumption. Thus, in addition to the old cumulative regime calculated on company revenues, the noncumulative regime was created with higher rates and the added value as a tax basis.
Design/methodology/approach
This paper analyzes the effects of the PIS/COFINS reform in a context of deindustrialization in the Brazilian economy, using a neoclassical model with two sectors.
Findings
The results suggest that after a small improvement in the aggregate economy in the short term, in the long term there was a worsening of the macroeconomic indicators. From the sector perspective, the PIS/COFINS reform may have contributed to the loss of industry participation in the Brazilian economy.
Originality/value
The study of the impact of the PIS/COFINS reform on industry through a neoclassical model is unprecedented in the national literature and contributes to the investigation of changes in the tax regime that occurred in the country.
Details
Keywords
Cássio da Nóbrega Besarria, Nelson Leitão Paes and Marcelo Eduardo Alves Silva
Housing prices in Brazil have displayed an impressive growth in recent years, raising some concerns about the existence of a bubble in housing markets. In this paper, the authors…
Abstract
Purpose
Housing prices in Brazil have displayed an impressive growth in recent years, raising some concerns about the existence of a bubble in housing markets. In this paper, the authors implement an empirical methodology to identify whether or not there is a bubble in housing markets in Brazil.
Design/methodology/approach
Based on a theoretical model that establish that, in the absence of a bubble, a long-run equilibrium relationship should be observed between the market price of an asset and its dividends. The authors implement two methodologies. First, the authors assess whether there is a cointegration relationship between housing prices and housing rental prices. Second, the authors test whether the price-to-rent ratio is stationary.
Findings
The authors’ results show that there is evidence of a bubble in housing prices in Brazil. However, given the short span of the data, the authors perform a Monte Carlo simulation and show that the cointegration tests may be biased in small samples. Therefore, the authors should be caution when assessing the results.
Research limitations/implications
The results obtained from the cointegration analysis can be biased for small samples.
Practical implications
The information on the excessive increase of the prices of the properties in relation to their fundamental value can help in the decision-making on investment of the economic agents.
Social implications
These results corroborate the hypothesis that Brazil has an excessive appreciation in housing prices, and, as Silva and Besarria (2018) have suggested, this behavior explains, in part, the fact that the central bank has taken this issue into account when deciding about the stance of monetary policy of Brazil.
Originality/value
The originality is linked to the use of the Gregory-Hansen method of cointegration in the identification of bubbles and discussion of the limitations of the research through Monte Carlo simulation.