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Public debt management and credibility: Evidence from an emerging economy

Author

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  • de Mendonça, Helder Ferreira
  • Machado, Marcelo Rangel

Abstract

This study is a contribution to the literature concerning the management of the public debt in emerging economies. A novelty in this article is the introduction of a fiscal credibility index based on the market's expectations in regard to the public debt to GDP ratio. The main objective is to present empirical evidence for the Brazilian case concerning the framework of the public debt composition and also the effect of this framework on public debt to GDP ratio. The findings demonstrate that the commitment with the public debt increases the fiscal credibility and that it is crucial for the success of the management of the public debt. Contrary to what is recommended in the standard literature an increase in the average maturity and the share of inflation-linked bonds imply costs that cannot be neglected.

Suggested Citation

  • de Mendonça, Helder Ferreira & Machado, Marcelo Rangel, 2013. "Public debt management and credibility: Evidence from an emerging economy," Economic Modelling, Elsevier, vol. 30(C), pages 10-21.
  • Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:10-21
    DOI: 10.1016/j.econmod.2012.09.009
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. de Mendonça, Helder Ferreira & Tiberto, Bruno Pires, 2014. "Public debt and social security: Level of formality matters," Economic Modelling, Elsevier, vol. 42(C), pages 490-507.
    2. repec:taf:apeclt:v:25:y:2018:i:4:p:278-282 is not listed on IDEAS
    3. repec:taf:apeclt:v:23:y:2016:i:11:p:816-821 is not listed on IDEAS
    4. Ana Jordânia De Oliveira & Gabriel Caldas Montes & Rodolfo Nicolay, 2018. "Fiscal Credibility And Central Bank Credibility: How Do We Build Them? Empirical Evidence From Brazil," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 43, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    5. Roseli Da Silva & Helder Ferreira De Mendonça, 2018. "Fiscal Credibility As Nominal Anchor: The Brazilian Experience," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 66, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    6. Felipe Santos Tostes & Helder Ferreira De Mendonça, 2016. "Credibility On Pass-Through In Brazil," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 022, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. repec:eee:ecosys:v:41:y:2017:i:3:p:408-419 is not listed on IDEAS
    8. Bruno Pires Tiberto & Gabriel Caldas Montes, 2016. "A Importância Da Administração Da Dívida Pública Para A Construção Da Reputação Fiscal E Redução Do Risco-País: Evidências Empíricas Para O Brasil," Anais do XLII Encontro Nacional de Economia [Proceedings of the 42nd Brazilian Economics Meeting] 025, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    9. Montes, Gabriel Caldas & Assumpção, Antonio Carlos de Jesus, 2014. "Uma Nota Sobre o Papel da Credibilidade da Política Monetária e Fiscal: Evidências para o Brasil," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 68(4), October.
    10. Aleksandras Vytautas Rutkauskas & Viktorija Stasytytė & Nijolė Maknickienė, 2014. "Government debt as the integral portfolio of assets and liabilities generated by debt," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 15(1), pages 22-40, February.
    11. Montes, Gabriel Caldas & Almeida, André Filipe Guedes, 2016. "Compromisso fiscal, expectativas empresariais e produção industrial: o caso brasileiro," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 70(2), July.
    12. repec:eco:journ1:2018-02-33 is not listed on IDEAS
    13. de Mendonça, Helder Ferreira & Nicolay, Rodolfo Tomás da Fonseca, 2017. "Is communication clarity from fiscal authority useful? Evidence from an emerging economy," Journal of Policy Modeling, Elsevier, vol. 39(1), pages 35-51.
    14. repec:fgv:epgrbe:v:68:y:2015:i:4:a:24609 is not listed on IDEAS
    15. repec:ebl:ecbull:eb-18-00001 is not listed on IDEAS
    16. Salem KANOUN, 2014. "The Sustainability of Fiscal Adjustment Process : A Quantitative Approach With an Application to Tunisia," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(10), pages 1314-1331, October.
    17. repec:ids:ijepee:v:10:y:2017:i:2:p:171-184 is not listed on IDEAS
    18. Paret, Anne-Charlotte, 2017. "Debt sustainability in emerging market countries: Some policy guidelines from a fan-chart approach," Economic Modelling, Elsevier, vol. 63(C), pages 26-45.
    19. Helder Ferreira De Mendonça & Rodolfo Tomás Da Fonseca Nicolay, 2018. "Effect Of The Communication And Clarity Of The Fiscal Authority On Market Expectations: Evidence From The Brazilian Economy," Anais do XLIV Encontro Nacional de Economia [Proceedings of the 44th Brazilian Economics Meeting] 65, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    20. Ismet GOCER & Mehmet MERCAN, 2016. "Which country after Greece? Sustainability of budget deficits in selected EU countries: A panel cointegration analysis with multiple structural breaks under cross-section dependence," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 205-220, Autumn.
    21. Ismet GOCER & Mehmet MERCAN, 2016. "Which country after Greece? Sustainability of budget deficits in selected EU countries: A panel cointegration analysis with multiple structural breaks under cross-section dependence," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(3(608), A), pages 205-220, Autumn.
    22. Helder Mendonça & Felipe Tostes, 2015. "The Effect of Monetary and Fiscal Credibility on Exchange Rate Pass-Through in an Emerging Economy," Open Economies Review, Springer, vol. 26(4), pages 787-816, September.
    23. Joseph David Barroso Vasconcelos de Deus & Helder Ferreira de Mendonça, 2015. "Empirical evidence on fiscal forecasting in Eurozone countries," Journal of Economic Studies, Emerald Group Publishing, vol. 42(5), pages 838-860, October.
    24. Helder Ferreira de Mendonça & Roseli da Silva, 2016. "2333-2349," Economics Bulletin, AccessEcon, vol. 32767(4), pages 2333-2349.

    More about this item

    Keywords

    Public debt; Fiscal credibility; Indexation;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • 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

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