Intertemporal solvency and indexed debt: evidence from Brazil, 1976-1991

Article Abstract:

Brazil's government debt, financial indexation, inflation and intertemporal solvency are studied. Temporal causality of expenditures, taxation and real indexation are studied using an error-correction model. Decreases in real indexation came after the rise in government spending during 1986-1991. These reductions implicitly stood as defaults while serving as part of anti-inflation plans. Brazil ended up with a backward financial indexation since the policy could not survive in the long-run.

Brazil, Indexation (Economics)

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Optimal loan contracts and floating-rate debt in international lending to LDCs

Article Abstract:

Capital movements into less developed countries (LDC) from the 1970s were subjected to floating rates based on the London Interbank Reference Rate (LIBOR). The consequences of floating and fixed rates on an LDC economy experiencing indefinite export income and import prices were examined. It was concluded since that export revenues and import prices are positively influenced by LIBOR, floating-rate debt is more advantageous than fixed-rate in terms of risk-sharing.

Finance, International aspects, Developing countries, Capital market, Capital markets, External debts

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The simple dynamics of a debt crisis

Article Abstract:

A study was conducted to examine the optimal growth path of a neoclassical economy. The study assumes that creditors impose ceilings, which become binding in finite time, to avoid debt repudiation. A period of credit constraint is marked by rising real interest rates and falling foreign capital inflows, real wages, output per-capita and consumption. Results show that debt crises can happen even with no unexpected shocks, policy mistakes or carryover debt effects.

Debt

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