SOME CONSIDERATIONS ABOUT THE BRAZILIAN INTEREST RATE MARKET

Rodrigo Cabral ()
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Rodrigo Cabral: Universidade de Brasília (UnB)

Revista de Economia Mackenzie (REM), 2007, vol. 5, issue 5, 10-64

Abstract: The existence and magnitude of risk premiums in the Brazilian term struc-ture is not clear, particularly because it’s a market in the process of develop-ment. Some year ago the Brazilian Central Bank created a system to measure market expectations for economic indicators, including the interest rates, and then give inputs to the inflation target regime. Nevertheless, if the system re-ally represents “actual†expectations is a question to be answered. These are some of the motivations for this paper, together with the relation between the futures market and collected expectations, the risk premium for public debt securities and the relevance of these topics to public debt management. The main contributions are the measurement of the term structure of the risk pre-mium in the Brazilian market, using the Kalman filter, and an estimation of market expectations. Furthermore, we investigate the expectations collected by the Central Bank and cover other minor topics, such as the determinants of the risk premium and the “government†premium.

Keywords: Risk premium; Public debt; Expectations; Kalman filter; Interest rate term structure. (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:aft:journl:v:5:5:2007:jan:dec:p:10-64

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