Inflationary bias and state owned financial institutions

Walter Novaes and Sergio Werlang

No 242, FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil)

Abstract: This article explains why the existence of state owned financial institutions makes it more difficult for a country to balance its budget. We show that states can use their financiaI institutions to transfer their deficits to the federal govemment. As a result, there is a bias towards Iarge deficits and high inflation rates. Our model also predicts that state owned financiaI institutions should underperform the market, mainly because they concentrate their portfolios on non-performing loans to their own shareholders, that is, the states. Brazil and Argentina are two countries with a history of high inflation that confirm our predictions .

Date: 1994-06
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
https://repositorio.fgv.br/bitstreams/94f98d24-698 ... 669601842e3/download (application/pdf)

Related works:
Journal Article: Inflationary bias and state-owned financial institutions (1995)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fgv:epgewp:242

Access Statistics for this paper

More papers in FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) from EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil) Contact information at EDIRC.
Bibliographic data for series maintained by Núcleo de Computação da FGV EPGE ().