Public debt indexation and denomination, the case of Brazil: a comment
In this work I analyse the model proposed by Goldfajn to study the choice of the denomination of the public debt. The main purpose of the analysis is to point out possible reasons why new empirical evidence provided by Bevilacqua et al., regarding a more recent time period, gives less empirical support to the model. I also provide a measure of the overestimation of welfare gains from hedging the debt caused by the simplified time frame of Goldfajn's model. Assuming a time-preference parameter of 0.9, for instance, consumption gains associated with a hedge to the debt that reduces by half a one-time 20%-of-GDP shock to government spending run around 1.43% under the no-tax-smoothing structure of the model. Under a Ramsey allocation, though, consumption increases by just 0.05%. Copyright © 2007 John Wiley & Sons, Ltd.
Volume (Year): 12 (2007)
Issue (Month): 4 ()
|Contact details of provider:|| Web page: http://www.interscience.wiley.com/jpages/1076-9307/|
|Order Information:||Web: http://jws-edcv.wiley.com/jcatalog/JournalsCatalogOrder/JournalOrder?PRINT_ISSN=1076-9307|
References listed on IDEAS
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.:
- David Cass & Alessandro Citanna, 1998.
"Pareto improving financial innovation in incomplete markets,"
Springer;Society for the Advancement of Economic Theory (SAET), vol. 11(3), pages 467-494.
- David Cass & Alessandro Citanna, 1998. "Pareto Improving Financial Innovation in Incomplete Markets," Post-Print hal-00479286, HAL.
- Robert Barro, 2003.
"Optimal Management of Indexed and Nominal Debt,"
Annals of Economics and Finance,
Society for AEF, vol. 4(1), pages 1-15, May.
- Robert J. Barro, 2002. "Optimal Management of Indexed and Nominal Debt," Central Banking, Analysis, and Economic Policies Book Series, in: Fernando Lefort & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Serie (ed.), Indexation, Inflation and Monetary Policy, edition 1, volume 2, chapter 5, pages 135-150 Central Bank of Chile.
- Robert Barro, 1998. "Optimal Management of Indexed and Nominal Debt," Working Papers Central Bank of Chile 26, Central Bank of Chile.
- Robert Barro, 2003. "Optimal Management of Indexed and Nominal Debt," CEMA Working Papers 496, China Economics and Management Academy, Central University of Finance and Economics.
- Robert J. Barro, 1997. "Optimal Management of Indexed and Nominal Debt," NBER Working Papers 6197, National Bureau of Economic Research, Inc.
- William R. Zame, 1992.
"Efficiency and the Role of Default When Security Markets are Incomplete,"
UCLA Economics Working Papers
673, UCLA Department of Economics.
- Zame, William R, 1993. "Efficiency and the Role of Default When Security Markets Are Incomplete," American Economic Review, American Economic Association, vol. 83(5), pages 1142-1164, December.
- William R. Zame, 1990. "Efficiency and the Role of Default When Security Markets are Incomplete," UCLA Economics Working Papers 585, UCLA Department of Economics.
- Lucas, Robert Jr. & Stokey, Nancy L., 1983.
"Optimal fiscal and monetary policy in an economy without capital,"
Journal of Monetary Economics,
Elsevier, vol. 12(1), pages 55-93.
- Robert E. Lucas Jr. & Nancy L. Stokey, 1982. "Optimal Fiscal and Monetary Policy in an Economy Without Capital," Discussion Papers 532, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Goldfajn, Ilan, 2000.
"Public Debt Indexation and Denomination: The Case of Brazil,"
International Journal of Finance & Economics,
John Wiley & Sons, Ltd., vol. 5(1), pages 43-56, February.
- Ilan Goldfajn, 1998. "Public Debt Indexation and Denomination: The Case of Brazil," Working Papers Central Bank of Chile 27, Central Bank of Chile.
- Ilan Goldfajn, 1998. "Public Debt Indexation and Denomination; The Case of Brazil," IMF Working Papers 98/18, International Monetary Fund.
- David M. G. Newbery & Joseph E. Stiglitz, 1984. "Pareto Inferior Trade," Review of Economic Studies, Oxford University Press, vol. 51(1), pages 1-12.
- Henning Bohn, .
"A Positive Theory of Foreign Currency Debt,"
Rodney L. White Center for Financial Research Working Papers
19-88, Wharton School Rodney L. White Center for Financial Research.
- Bohn, Henning, 1988. "Why do we have nominal government debt?," Journal of Monetary Economics, Elsevier, vol. 21(1), pages 127-140, January.
- Bohn, Henning, 1990. "Tax Smoothing with Financial Instruments," American Economic Review, American Economic Association, vol. 80(5), pages 1217-1230, December.
- Ilan Goldfajn & Áureo Nilo de Paula, 1999. "Uma nota sobre a composição ótima da dívida pública - reflexões para o caso brasileiro," Textos para discussão 411, Department of Economics PUC-Rio (Brazil).
- Barro, Robert J, 1979.
"On the Determination of the Public Debt,"
Journal of Political Economy,
University of Chicago Press, vol. 87(5), pages 940-971, October.
- Missale, Alessandro, 1999. "Public Debt Management," OUP Catalogue, Oxford University Press, number 9780198290858, December.
- Calvo, Guillermo A, 1978. "On the Time Consistency of Optimal Policy in a Monetary Economy," Econometrica, Econometric Society, vol. 46(6), pages 1411-1428, November.
When requesting a correction, please mention this item's handle: RePEc:ijf:ijfiec:v:12:y:2007:i:4:p:417-425. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.