Public Debt Management in Brazil
AbstractThis Paper derives the optimal composition of the Brazilian public debt by looking at the relative impact of the risk and cost of alternative debt instruments on the probability of missing the stabilization target. This allows to price risk against the expected cost of debt service and thus to find the optimal combination along the trade-off between cost and risk minimization. The optimal debt structure is a function of the expected return differentials between debt instruments, of the conditional variance of debt returns and of their covariances with output growth, inflation, exchange-rate depreciation and the Selic rate. We estimate the relevant covariances by: i) exploiting the daily survey of expectations; ii) simulating a small structural model of the Brazilian economy under different shocks; iii) estimating the unanticipated components of the relevant variables with forecasting regressions. The empirical evidence strongly supports the funding strategy of Brazilian Treasury in 2003 of relying heavily on fixed-rate LTN bonds. It also supports its recent decision to revitalize the market for price-indexed bonds with the new NTN-B program of IPCA indexation. Though decreasing, the exposure to exchange rate risk appears too large suggesting that more efforts should be made to reduce funding in foreign currencies.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4293.
Date of creation: Mar 2004
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Francesco Giavazzi & Alessandro Missale, 2004. "Public Debt Management in Brazil," NBER Working Papers 10394, National Bureau of Economic Research, Inc.
- Alessandro Missale & Francesco Giavazzi, 2003. "Public Debt Management in Brazil," Development Working Papers 178, Centro Studi Luca d\'Agliano, University of Milano.
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-06-13 (All new papers)
- NEP-IFN-2004-06-13 (International Finance)
- NEP-PBE-2004-06-13 (Public Economics)
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.:
- Bevilaqua, Afonso S & Garcia, Marcio G P, 2002.
"Debt Management in Brazil: Evaluation of the Real Plan and Challenges Ahead,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 7(1), pages 15-35, January.
- Bevilaqua, Alfonso S. & Garcia, Marcio G. P., 2000. "Debt management in Brazil : evaluation of the Real Plan and challenges ahead," Policy Research Working Paper Series 2402, The World Bank.
- Afonso S. Bevilaqua & Márcio Gomes Pinto Garcia, 1999. "Debt management in Brazil: evaluation of the Real Plan and challenges ahead," Textos para discussÃ£o 408, Department of Economics PUC-Rio (Brazil).
- Persson, Mats & Persson, Torsten & Svensson, Lars E O, 1996.
"Debt, Cash Flow and Inflation Incentives: A Swedish Example,"
CEPR Discussion Papers
1488, C.E.P.R. Discussion Papers.
- Persson, M & Persson, T & Svensson, L-E-O, 1996. "Debt, Cash Flow and Inflation Incentives : A Swedish Example," Papers 613, Stockholm - International Economic Studies.
- Mats Persson & Torsten Persson & Lars E. O. Svensson, 1996. "Debt, Cash Flow and Inflation Incentives: A Swedish Example," NBER Working Papers 5772, National Bureau of Economic Research, Inc.
- Persson, Mats & Persson, Torsten & Svensson, Lars E.O., 1997. "Debt, cash flow and inflation incentives: A Swedish example," Seminar Papers 613, Stockholm University, Institute for International Economic Studies.
- Falcetti, Elisabetta & Missale, Alessandro, 2002.
"Public debt indexation and denomination with an independent central bank,"
European Economic Review,
Elsevier, vol. 46(10), pages 1825-1850, December.
- Alessandro Missale & Elisabetta Falcetti, . "Public Debt Indexation and Denomination with and Indipendent Central Bank," Working Papers 169, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, number 9780198290858.
- Carlo Ambrogio Favero & Francesco Giavazzi, . "Why are Brazil´s Interest Rates so High?," Working Papers 224, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Ilan Goldfajn, 1998. "Public Debt Indexation and Denomination," IMF Working Papers 98/18, International Monetary Fund.
- Márcio Gomes Pinto Garcia, 2002. "Public debt management, monetary policy and financial institutions," Textos para discussÃ£o 464, Department of Economics PUC-Rio (Brazil).
- Alessandro Missale, . "Optimal Debt Management with a Stability and Growth Pact," Working Papers 166, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Melecky, Martin, 2008. "An alternative framework for foreign exchange risk management of sovereign debt," Policy Research Working Paper Series 4458, The World Bank.
- Martin Melecky, 2012.
"Choosing The Currency Structure Of Foreign‐Currency Debt: A Review Of Policy Approaches,"
Journal of International Development,
John Wiley & Sons, Ltd., vol. 24(2), pages 133-151, 03.
- Melecky, Martin, 2010. "Choosing the Currency Structure of Foreign-currency Debt: a Review of Policy Approaches," MPRA Paper 21268, University Library of Munich, Germany.
- Aleš Melecký & Martin Melecký, 2012. "The Impact of Macroeconomic Shocks on the Government Debt Dynamics: How Robust is the Fiscal Stance of the Czech Republic?," Politická ekonomie, University of Economics, Prague, vol. 2012(6), pages 723-742.
- Fábio Giambiagi, 2006. "A Política Fiscal do Governo Lula em Perspectiva Histórica: Qual é o Limite para o Aumento do Gasto Público?," Discussion Papers 1169, Instituto de Pesquisa Econômica Aplicada - IPEA.
- Hans J. Blommestein & Javier Santiso, 2007. "New Strategies for Emerging Domestic Sovereign Bond Markets," OECD Development Centre Working Papers 260, OECD Publishing.
- Laura Alfaro & Fabio Kanczuk, 2006. "Deuda soberana: indexación y vencimiento," Research Department Publications 4460, Inter-American Development Bank, Research Department.
- Melecky, Martin, 2012. "Formulation of public debt management strategies: An empirical study of possible drivers," Economic Systems, Elsevier, vol. 36(2), pages 218-234.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.