Monetary and Fiscal Policy Coordination Under Economic Uncertainty in Brazil: A Comparative Analysis Between EPU and CCI

Abstract

This article analyzes the coordination between monetary and fiscal policies under economic uncertainty in
Brazil, comparing the results obtained with two distinct measures of uncertainty: the Economic Policy
Uncertainty Index (EPU) and the Consumer Confidence Index (CCI). Using the Generalized Method of
Moments System to estimate a system of simultaneous equations with monthly data from 2003 to 2025, the
study initially replicates the original model with EPU and then replaces this variable with the CCI. The results
indicate that monetary policy acts in a countercyclical manner in both models, while fiscal policy presents
ambiguous behavior: under uncertainty it tends to be pro-cyclical, but in the absence of uncertainty it is
countercyclical. A substitution relationship between monetary and fiscal policies is observed, with a more
contractionary fiscal policy associated with a more expansionary monetary policy. Notably, the CCI
coefficients tend to be statistically more statistically significant than those of the EPU.