Cruzeiros’ auctions and discount rate for ‘new cruzeiros

Fábio Giambiagi ()

Brazilian Journal of Political Economy, 1991, vol. 11, issue 1, 153-156

Abstract: This paper is an attempt to calculate which should be the discount of NCZ$if the Brazilian Central Bank did auctions to convert them into Cr$. Using some simpleformulae of financial mathematics, it is shown that discount is a direct function of expectedmarket rate of interest and an inverted one of term up to the conversion from NCZ$ intoCr$. Based on it, a matrix of results is made, which could be useful to isolate the discountdue exclusively to distrust from the whole discount. The most outstanding conclusion is thatdiscount could be high even within a context of full confidence, just because the expectedmarket rate of interest is high too. JEL Classification: E31; E51.

Keywords: Monetary policy; stabilization; Collor Plan (search for similar items in EconPapers)
Date: 1991
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