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‘Cruzeiros’ auctions and discount rate for ‘new cruzeiros’

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  • Fábio Giambiagi

Abstract

This paper is an attempt to calculate which should be the discount of NCZ$if the Brazilian Central Bank did auctions to convert them into Cr$. Using some simpleformulae of financial mathematics, it is shown that discount is a direct function of expectedmarket rate of interest and an inverted one of term up to the conversion from NCZ$ intoCr$. Based on it, a matrix of results is made, which could be useful to isolate the discountdue exclusively to distrust from the whole discount. The most outstanding conclusion is thatdiscount could be high even within a context of full confidence, just because the expectedmarket rate of interest is high too. JEL Classification: E31; E51.

Suggested Citation

  • Fábio Giambiagi, 1991. "‘Cruzeiros’ auctions and discount rate for ‘new cruzeiros’," Brazilian Journal of Political Economy, Center of Political Economy, vol. 11(1), pages 153-156.
    • Handle: RePEc:ekm:repojs:v:11:y:1991:i:1:p:153-156:id:1455
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    More about this item

    Keywords

    Monetary policy; stabilization; Collor Plan;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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