Public Debt Indexation and Denomination: The Case of Brazil

Ilan Goldfajn

No 1998/018, IMF Working Papers from International Monetary Fund

Abstract: The paper models the optimal debt management strategy of the public sector when issuing nominal, price-level-indexed and foreign-denominated debt securities. The model predicts that the variance of inflation, the size of the public debt, the variance of the real exchange rate, and the correlation of inflation with public expenditures are the main determinants of public debt management. Using this framework, the paper analyzes the Brazilian experience with indexed debt in the last decade. In particular, it explains the large increase of indexed public debt in Brazil prior to the 1994 Real plan and, thereafter, the steady decline in its use.

Keywords: WP; debt; exchange rate; real value; Public debt; indexation; Brazil; nominal debt; denominated debt; indexed debt; debt holder; composition system estimation; indexation mechanism; Inflation; Real exchange rates; Hedging (search for similar items in EconPapers)
Pages: 28
Date: 1998-02-01
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Public Debt Indexation and Denomination: The Case of Brazil (2000)
Working Paper: Public Debt Indexation and Denomination: The Case of Brazil (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:1998/018

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