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Author: Mr.Alex Segura-Ubiergo
Publisher: International Monetary Fund
ISBN: 146393839X
Category : Business & Economics
Languages : en
Pages : 20
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Book Description
This paper highlights that real interest rates in Brazil have declined substantially over time, but are still well above the average of emerging market inflation targeting regimes. The adoption of an inflation-targeting regime and better economic fundamentals (reduction in inflation volatility and improvements in the fiscal and external positions) has helped Brazil sustain significantly lower real interest rates than in the past. Going forward, the paper shows that Brazil can converge towards lower equilibrium real interest rates if domestic savings increase to the level of other emerging market countries. The effect is particularly pronounced if the increase in domestic savings is achieved through higher levels of public savings. Still, econometric results suggest that, controlling for everything else in the model, real interest rates in Brazil are about two full percentage points higher than in other countries in the sample, suggesting that there are still Brazil-specific factors that have not been captured by the empirical analysis. Some of these factors may include credit market segmentation and inflation inertia generated by still pervasive indexation practices.
Author: Mr.Alex Segura-Ubiergo
Publisher: International Monetary Fund
ISBN: 1463948263
Category : Business & Economics
Languages : en
Pages : 20
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Book Description
This paper highlights that real interest rates in Brazil have declined substantially over time, but are still well above the average of emerging market inflation targeting regimes. The adoption of an inflation-targeting regime and better economic fundamentals (reduction in inflation volatility and improvements in the fiscal and external positions) has helped Brazil sustain significantly lower real interest rates than in the past. Going forward, the paper shows that Brazil can converge towards lower equilibrium real interest rates if domestic savings increase to the level of other emerging market countries. The effect is particularly pronounced if the increase in domestic savings is achieved through higher levels of public savings. Still, econometric results suggest that, controlling for everything else in the model, real interest rates in Brazil are about two full percentage points higher than in other countries in the sample, suggesting that there are still Brazil-specific factors that have not been captured by the empirical analysis. Some of these factors may include credit market segmentation and inflation inertia generated by still pervasive indexation practices.
Author: Mr.Alex Segura-Ubiergo
Publisher: International Monetary Fund
ISBN: 146393839X
Category : Business & Economics
Languages : en
Pages : 20
Get Book Here
Book Description
This paper highlights that real interest rates in Brazil have declined substantially over time, but are still well above the average of emerging market inflation targeting regimes. The adoption of an inflation-targeting regime and better economic fundamentals (reduction in inflation volatility and improvements in the fiscal and external positions) has helped Brazil sustain significantly lower real interest rates than in the past. Going forward, the paper shows that Brazil can converge towards lower equilibrium real interest rates if domestic savings increase to the level of other emerging market countries. The effect is particularly pronounced if the increase in domestic savings is achieved through higher levels of public savings. Still, econometric results suggest that, controlling for everything else in the model, real interest rates in Brazil are about two full percentage points higher than in other countries in the sample, suggesting that there are still Brazil-specific factors that have not been captured by the empirical analysis. Some of these factors may include credit market segmentation and inflation inertia generated by still pervasive indexation practices.
Author: Edmar L. Bacha
Publisher: International Monetary Fund
ISBN:
Category : Business & Economics
Languages : en
Pages : 34
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Book Description
We investigate the role of financial dollarization in the determination of real interest rates in emerging economies. In a simple analytical model, we show that a strategy of "dedollarizing" the economy, if it fails to address fundamental macroeconomic risks, leads to higher domestic real interest rates. We confirm this prediction in an empirical model, but find that the effect is small after controlling for the risks of dilution and default. Brazil provides a natural case study given its low degree of financial dollarization and very high real interest rates. The estimated model is unable to explain the high interest rate levels in the aftermath of Brazil's 1994 inflation stabilization. However, since the adoption in 1999 of inflation targeting and floating exchange rates, Brazil's real interest rates are gradually converging to the model's predicted values. The estimation also shows that further drops in Brazil's real interest rates could be achieved more effectively through improvements in fundamentals that lead to investment-grade status rather than through financial dollarization.
Author: Carlo A. Favero
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Fernando M. Goncalves
Publisher:
ISBN:
Category :
Languages : en
Pages : 27
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Book Description
We investigate the role of financial dollarization in the determination of real interest rates in emerging economies. In a simple analytical model, we show that a strategy of de-dollarizing the economy, if it fails to address fundamental macroeconomic risks, leads to higher domestic real interest rates. We confirm this prediction in an empirical model, but find that the effect is small after controlling for the risks of dilution and default. Brazil provides a natural case study given its low degree of financial dollarization and very high real interest rates. The estimated model is unable to explain the high interest rate levels in the aftermath of Brazil's 1994 inflation stabilization. However, since the adoption in 1999 of inflation targeting and floating exchange rates, Brazil's real interest rates are gradually converging to the model's predicted values. The estimation also shows that further drops in Brazil's real interest rates could be achieved more effectively through improvements in fundamentals that lead to investment-grade status rather than through financial dollarization.
Author: Thereza Balliester Reis
Publisher:
ISBN:
Category : Brazil
Languages : en
Pages : 87
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Author:
Publisher:
ISBN:
Category :
Languages : pt-BR
Pages :
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Esta dissertação visa propor e analisar, no contexto de modelos dinâmicosestocásticos de equilíbrio geral com rigidez de preços, possíveis explicações parao fato estilizado de que o juro no Brasil é excessivamente alto. As implicaçõesde diferentes hipóteses aplicadas aos modelos serão analisadas através de funçõesde resposta a impulso (FRIs). Será analisada, quando possível, a evidênciaempírica disponível na literatura a favor ou contra cada hipótese, e as FRIsmostrarão o comportamento dinâmico da economia calibrada sob cada hipótese. São compatíveis com um juro real básico mais alto por um período prolongado asseguintes hipóteses: alta taxa subjetiva de desconto intertemporal, alta indexaçãode preços, baixa potência da política monetária, e diminuição da credibilidade doBanco Central frente o crescimento da dívida pública (um caso de dominânciafiscal).
Author: Olivier J. Blanchard
Publisher:
ISBN:
Category : Fiscal policy
Languages : en
Pages : 62
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Book Description
"A standard proposition in open-economy macroeconomics is that a central-bank-engineered increase in the real interest rate makes domestic government debt more attractive and leads to a real appreciation. If, however, the increase in the real interest rate also increases the probability of default on the debt, the effect may be instead to make domestic government debt less attractive, and to lead to a real depreciation. That outcome is more likely the higher the initial level of debt, the higher the proportion of foreign-currency-denominated debt, and the higher the price of risk. Under that outcome, inflation targeting can clearly have perverse effects: An increase in the real interest in response to higher inflation leads to a real depreciation. The real depreciation leads in turn to a further increase in inflation. In this case, fiscal policy, not monetary policy, is the right instrument to decrease inflation. This paper argues that this is the situation the Brazilian economy found itself in in 2002 and 2003. It presents a model of the interaction between the interest rate, the exchange rate, and the probability of default, in a high-debt high-risk-aversion economy such as Brazil during that period. It then estimates the model, using Brazilian data. It concludes that, in 2002, the level and the composition of public debt in Brazil, and the general level of risk aversion in world financial markets, were indeed such as to imply perverse effects of the interest rate on the exchange rate and on inflation"--NBER website
Author: Carlo A. Favero
Publisher:
ISBN:
Category : Brazil
Languages : en
Pages : 44
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Book Description
Author: Thiago Trafane Oliveira Santos
Publisher:
ISBN:
Category :
Languages : en
Pages :
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