Public debt and risk premium: An analysis from an emerging economy
AbstractPurpose – This analysis seeks to deal with the emerging economies and to reveal that, if the fiscal authority is accountable with a policy that stabilizes the public debt/GDP ratio, the consequence is a low Treasury bond risk premium. Design/methodology/approach – Based on the purpose of this paper, a theoretical model is developed and empirical evidence through an autoregressive distributed lag (ADL) model, taking into account the Brazilian experience, is made. Findings – The findings denote that domestic variables are responsible for determining the risk premium. Moreover, a correct management of the public debt and the use of primary surplus targets make for a good strategy for promoting a fall in the Treasury bond risk premium. Practical implications – Primary surplus and public debt/GDP ratio can be used as important tools for mitigating the Treasury bond risk premium. Originality/value – The results of the paper give some new insights about the management of fiscal policy for developing countries.
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Bibliographic InfoArticle provided by Emerald Group Publishing in its journal Journal of Economic Studies.
Volume (Year): 38 (2011)
Issue (Month): 2 (May)
Contact details of provider:
Web page: http://www.emeraldinsight.com
Postal: Emerald Group Publishing, Howard House, Wagon Lane, Bingley, BD16 1WA, UK
Find related papers by JEL classification:
- E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
- H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Guillermo Calvo, 2002. "Globalization Hazard and Delayed Reform in Emerging Markets," Journal of LACEA Economia, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
- Carlo A. Favero & Francesco Giavazzi, 2004.
"Inflation Targeting and Debt: Lessons from Brazil,"
NBER Working Papers
10390, National Bureau of Economic Research, Inc.
- Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993.
"Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors,"
IMF Staff Papers,
Palgrave Macmillan, vol. 40(1), pages 108-151, March.
- Leonardo Leiderman & Carmen Reinhart & Guillermo Calvo, 1992. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Working Papers 92/62, International Monetary Fund.
- Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1993. "“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," MPRA Paper 7125, University Library of Munich, Germany.
- Barbosa, Fernando de Holanda, 2005. "The Contagion Effect of Public Debt on Monetary Policy: The Brazilian Experience," Economics Working Papers (Ensaios Economicos da EPGE) 591, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Montes, Gabriel Caldas & Tiberto, Bruno Pires, 2012. "Macroeconomic environment, country risk and stock market performance: Evidence for Brazil," Economic Modelling, Elsevier, vol. 29(5), pages 1666-1678.
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