Public Debt Management and Sustainability in Brazil: An Analysis for 1995-2007 period

Abstract

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.