Mendonça, Mário Jorge Pires, Manoel Carlos de Castro Medrano, Luiz Alberto
Year of Publication:
Texto para Discussão No. 1342
This paper aims to evaluate how public debt management in Brazil has affected its sustainability in the 1996-2007 period. In 2003 Brazilian public debt management changed the trade off between cost minimization and risk minimization emphasizing the first element. Using a Markov-Switching model in order to model this policy change we access fiscal sustainability with Monte Carlo simulations. The results show that Brazilian public debt is sustainable in the medium run.