br Conclusion The fiscal indicators applied to the Brazilian
Conclusion The fiscal indicators applied to the Brazilian case indicate that there was a reduction in the fiscal vulnerability for the progesterone receptor from January 2007 to September 2012. Besides the stabilization of costs to service debt, the indicators of fiscal insurance show the protection of the government budget against shocks on primary deficit was increased. Nevertheless, the empirical evidence suggests that the public debt management had little effect in increasing fiscal insurance. A possible reason for this result is that the low volatility of the term structure of interest rates can become the strategy of lengthening the public debt maturity ineffective for fiscal insurance. Another explanation, such as pointed out by Faraglia et al. (2008), is the idea that policymakers are more concerned with minimizing costs instead of the risk.
Introduction There is no doubt every country needs funding to foster economic growth and development. However, such funding needs to be sustainable and it has to be closely in line with the government\'s fiscal and monetary policies. That is why managing public debt is so crucial. According to Agell and Persson (1989) “public debt management can be defined as the government\'s (including the central bank) choice regarding the composition of the outstanding stock of all the securities entering the liability side of its balance sheet”. A great amount of economic literature has dealt with the research related to public debt management in a quite controversial way. For instance, the so-called Ricardian Equivalence theory points out that public debt is neutral with respect to consumption and, as result, with respect to macroeconomic dynamics, so long as agents allocate their savings in order to have a permanent income over their entire lifetimes. In other words, a larger public debt leads to more savings in the present period, because individuals expect to pay higher taxes in the future, which results in no effect in economic activity. On the other hand, Tobin (1963) argues that economic activity can be influenced by public debt management, as authorities can “determine the size and the maturity structure of debt held by the private sector and, given imperfect substitutability of assets along the maturity spectrum, this will normally influence the shape of the yield curve” (Filardo et al., 2012). Besides this introduction, this paper is organized as follows. The Section 2 shows the main debates about public debt management in Brazil, whilst the Section 3 describes the behavior of the Brazilian public debt from 1995 on. Section 4 describes the data series, the descriptive statistics and the econometric model. The Section 5 is about the unit root test results and the last two sections report the econometric results and the conclusions of the paper.
Public debt management in Brazil: a literature review Garcia and Salomão (2006) emphasize the relationship between a country\'s national debt and the systemic risk premium required by investors. Due to the quality of the debt, its maturity and duration cannot increase regardless of factors that buyers consider as non-diversifiable risks. In this scenario, attempting to lengthen the average maturity of the outstanding debt would not be enough, as the voluntary demand for securities from the financial sector might not meet government\'s expectations. The author argues that a successful lengthening of public debt would only be possible if measures were taken to strengthen the domestic financial market. Among the measures, we could list the reduction of foreign currency-denominated debt, fiscal stability to reduce the Debt/GDP ratio, controlled inflation, as a means of helping the central bank lower interest rates, besides helping diminish the importance of floating rate securities in the total debt. Levy (2006) called the attention to the actions taken by the Brazilian Treasury aiming at improving the country\'s debt profile. Two main measures were taken: (i) the issuance of exchange rate linked bonds was diminished; (ii) the investor base was diversified and expanded, attracting more domestic and mainly foreign bondholders, contributing to the improvement in systemic risk perception.