The impact of Petrobras spending on economic cycles by the lengths of its multipliers computed from non-linear model

Public spending influences a country's economic activities due to its effect on aggregate demand. Although existing research has focused on government expenditures to understand the multiplier impacts of public spending, there is scant literature focusing on the spending of state-owned enterprises (SOEs), especially in strategic sectors such as the oil sector. This study analyzes the spending behaviour of an important Brazilian SOE, Petrobras, to understand its consequences to the Brazilian economic activity. The results suggest that the multiplier impacts during recessions (0.10 BRL) are bigger than those during economic expansion periods (0.05 BRL). The accumulated multiplier of Petrobras's investment expenditures (0.43 BRL) is higher compared to current spending, especially in periods of recession (0.37 BRL). Moreover, the forecast error variance decomposition showed the impact the changes in the Petrobras government spending had on the Brazilian GDP growth in periods of expansion and contraction.