Assessing the impacts of <scp>Brazil's</scp> expenditure ceiling with a multiple‐household <scp>CGE</scp> model

Abstract Inspired by the Brazilian pre‐COVID‐19 pandemic context of fiscal austerity, we have applied a multiple‐household‐SAM‐based Computable General Equilibrium (CGE) model in order to analyze the economic impacts of different scenarios of government expenditure. We innovate at modeling an Expansionary Austerity scenario in a CGE framework and also by taking into account services of public health and education as part of the households extended income. Consistent with the literature, we verified that the expenditure ceiling can insure both Government savings and current account balance toward surplus. Apart from that, however, these surpluses have nothing to do with output and welfare improvement—even under a scenario where the expenditure ceiling “makes room” for the private investment.