Managing Brazilâ€™s Public Debt under the Original-Sin Hypothesis
Since public bond debt became a central element in the dynamic of public sector indebtedness in Brazil, its composition has played an important role in the conduction of macroeconomic policy. This article discusses the original-sinhypothesis formulated by Eichengreen and Hausman (1999) to evaluate the composition of Brazilian federal public debt. According to this hypothesis, the choice between indexation and duration takes the form of a trade-off, since the long-term, fixed-rate debt alternative that characterizes developed countries is not available to emerging countries. We present empirical evidence for Brazil, observing the 40-year evolution of federal bond debt since the creation of that market, which took place through the introduction of the instrument known as the ORTN in 1964.
Volume (Year): 2 (2005)
Issue (Month): 2 (July)
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