High Interest Rates in Brazil: A Panel-Based Analysis
Autor(a) principal: | |
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Data de Publicação: | 2009 |
Outros Autores: | , |
Tipo de documento: | Artigo |
Idioma: | eng por |
Título da fonte: | Revista Brasileira de Economia (Online) |
Texto Completo: | https://periodicos.fgv.br/rbe/article/view/1198 |
Resumo: | In a simple analytical model, we show that a strategy of “dedollarizing” the economy, if it fails to address fundamental macroeconomic risks, leads to higher domestic real interest rates. We confirm this prediction in an empirical model, but find that the effect is small after controlling for the risks of dilution and default. Brazil provides a natural case study given its low degree of financial dollarization and very high real interest rates. The estimated model is unable to explain the high interest rate levels in the aftermath of Brazil’s 1994 inflation stabilization. However, since the adoption in 1999 of inflation targeting and floating exchange rates, Brazil’s real interest rates are gradually converging to the model’s predicted values. The estimation also shows that further drops in Brazil’s real interest rates could be achieved more effectively through improvements in fundamentals that lead to investment-grade status rather than through financial dollarization. |
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High Interest Rates in Brazil: A Panel-Based AnalysisDolarização financeira, taxa de juros, economias emergentes, análise em painel, Brasil.In a simple analytical model, we show that a strategy of “dedollarizing” the economy, if it fails to address fundamental macroeconomic risks, leads to higher domestic real interest rates. We confirm this prediction in an empirical model, but find that the effect is small after controlling for the risks of dilution and default. Brazil provides a natural case study given its low degree of financial dollarization and very high real interest rates. The estimated model is unable to explain the high interest rate levels in the aftermath of Brazil’s 1994 inflation stabilization. However, since the adoption in 1999 of inflation targeting and floating exchange rates, Brazil’s real interest rates are gradually converging to the model’s predicted values. The estimation also shows that further drops in Brazil’s real interest rates could be achieved more effectively through improvements in fundamentals that lead to investment-grade status rather than through financial dollarization.A partir de uma abordagem em painel, este artigo expande o escopo da literatura sobre dolarização financeira para investigar os determinantes da taxa real de juros em economias emergentes. Nós encontramos que a taxa real de juros depende do risco de diluição de dívida e calote, expresso pela volatilidade e aceleração da inflação, assim como o tamanho da dívida pública, a classificação de risco soberano e a renda per capita. Como antecipado em um modelo analítico, acessibilidade a depósitos denominados em dólares reduz a taxa de juros em moeda local. O modelo estimado é usado para analisar o mistério das altas taxas reais de juros no Brasil. Nosso modelo empírico, contudo, é incapaz de explicar as altas taxas reais de juros após 1994. Entretanto, com a ajuda de uma regra de prudência proposta para o banco central que enfrenta expectativas adversas, nós argumentamos que, desde a adoção do regime de metas de inflação e de taxas de câmbio flutuantes, as taxas reais de juros vem convergindo lentamente para valores previstos pelo nosso modelo para as taxas reais de juros.EGV EPGE2009-12-09info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionArticlesArtigosapplication/pdfapplication/pdfhttps://periodicos.fgv.br/rbe/article/view/1198Revista Brasileira de Economia; Vol. 63 No. 4 (2009); 207-226Revista Brasileira de Economia; v. 63 n. 4 (2009); 207-2261806-91340034-7140reponame:Revista Brasileira de Economia (Online)instname:Fundação Getulio Vargas (FGV)instacron:FGVengporhttps://periodicos.fgv.br/rbe/article/view/1198/867https://periodicos.fgv.br/rbe/article/view/1198/871Bacha, EdmarHolland, MarcioGonçalves, Fernando M.info:eu-repo/semantics/openAccess2010-01-11T18:08:04Zoai:ojs.periodicos.fgv.br:article/1198Revistahttps://periodicos.fgv.br/rbe/https://periodicos.fgv.br/rbe/oai||rbe@fgv.br1806-91340034-7140opendoar:2024-03-06T13:03:02.150623Revista Brasileira de Economia (Online) - Fundação Getulio Vargas (FGV)true |
dc.title.none.fl_str_mv |
High Interest Rates in Brazil: A Panel-Based Analysis Dolarização financeira, taxa de juros, economias emergentes, análise em painel, Brasil. |
title |
High Interest Rates in Brazil: A Panel-Based Analysis |
spellingShingle |
High Interest Rates in Brazil: A Panel-Based Analysis Bacha, Edmar |
title_short |
High Interest Rates in Brazil: A Panel-Based Analysis |
title_full |
High Interest Rates in Brazil: A Panel-Based Analysis |
title_fullStr |
High Interest Rates in Brazil: A Panel-Based Analysis |
title_full_unstemmed |
High Interest Rates in Brazil: A Panel-Based Analysis |
title_sort |
High Interest Rates in Brazil: A Panel-Based Analysis |
author |
Bacha, Edmar |
author_facet |
Bacha, Edmar Holland, Marcio Gonçalves, Fernando M. |
author_role |
author |
author2 |
Holland, Marcio Gonçalves, Fernando M. |
author2_role |
author author |
dc.contributor.author.fl_str_mv |
Bacha, Edmar Holland, Marcio Gonçalves, Fernando M. |
description |
In a simple analytical model, we show that a strategy of “dedollarizing” the economy, if it fails to address fundamental macroeconomic risks, leads to higher domestic real interest rates. We confirm this prediction in an empirical model, but find that the effect is small after controlling for the risks of dilution and default. Brazil provides a natural case study given its low degree of financial dollarization and very high real interest rates. The estimated model is unable to explain the high interest rate levels in the aftermath of Brazil’s 1994 inflation stabilization. However, since the adoption in 1999 of inflation targeting and floating exchange rates, Brazil’s real interest rates are gradually converging to the model’s predicted values. The estimation also shows that further drops in Brazil’s real interest rates could be achieved more effectively through improvements in fundamentals that lead to investment-grade status rather than through financial dollarization. |
publishDate |
2009 |
dc.date.none.fl_str_mv |
2009-12-09 |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article info:eu-repo/semantics/publishedVersion Articles Artigos |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
https://periodicos.fgv.br/rbe/article/view/1198 |
url |
https://periodicos.fgv.br/rbe/article/view/1198 |
dc.language.iso.fl_str_mv |
eng por |
language |
eng por |
dc.relation.none.fl_str_mv |
https://periodicos.fgv.br/rbe/article/view/1198/867 https://periodicos.fgv.br/rbe/article/view/1198/871 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf application/pdf |
dc.publisher.none.fl_str_mv |
EGV EPGE |
publisher.none.fl_str_mv |
EGV EPGE |
dc.source.none.fl_str_mv |
Revista Brasileira de Economia; Vol. 63 No. 4 (2009); 207-226 Revista Brasileira de Economia; v. 63 n. 4 (2009); 207-226 1806-9134 0034-7140 reponame:Revista Brasileira de Economia (Online) instname:Fundação Getulio Vargas (FGV) instacron:FGV |
instname_str |
Fundação Getulio Vargas (FGV) |
instacron_str |
FGV |
institution |
FGV |
reponame_str |
Revista Brasileira de Economia (Online) |
collection |
Revista Brasileira de Economia (Online) |
repository.name.fl_str_mv |
Revista Brasileira de Economia (Online) - Fundação Getulio Vargas (FGV) |
repository.mail.fl_str_mv |
||rbe@fgv.br |
_version_ |
1798943112842706944 |