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Abstract:
This paper presents the latest version of the annual econometric model for the Brazilian economy developed by the Group of Macroeconomic Analysis and Modelling (Gamma) at IPEA/DIPES. The model is designed to make medium run projections and policy simulations. The specification of the model is basically Keynesian. Estimation features include the use of various time series methods, such as FIML (full information maximum likelihood) cointegration analysis and time varying parameters, besides OLS and instrumental variables estimation. In general, the development of the model's equations has explicitly tried to ensure desirable long-run properties as well as reasonable short-run dynamics.

Abstract:
We present projections of the trade and current account balances for Brazil in the period 2001/03. We show that external deficits shall persist during this period; given an international environment characterized by decreasing capital flows (especially those directed to emerging economies), this may impose considerable restrictions on domestic growth. We then discuss possible external adjustment strategies and their implications for domestic activity. The adjustment strategy could be based either on exchange rate devaluation or on additional investments in productive capacity. However, there are limits to both strategies, and we conclude that the evolution of the Brazilian economy during 2001/03 will depend on its ability to walk on the razor's edge given by the exchange rate/investment relationship.

Abstract:
This paper estimates export and import equations for Brazil using annual data from 1955 to 1995. The econometric procedures account for the nonstationarity of the data, applying cointegration techniques and using an error-correction model framework. The validity of treating conditioning variables as "exogenous" is investigated through proper exogeneity tests. The paper also presents forecasts of export and import growth rates for the period 1996/2000, under alternative scenarios.

Abstract:
This paper studies the medium run prospects--that is, up to 2003--for Brazilian foreign indebtedness based on an analytical framework that calculates the current account balance required to stabilize the ratio foreign liabilities/exports. We show that, in the absence of a real exchange rate devaluation, economic growth will be subject to significant constraints, so that a strategy of exc hange rate depreciation could be called for. We project the behavior of the main current account variables under alternative real exchange rate and GDP growth scenery.

Abstract:
In this paper we present projections for Brazil's balance of payments in 1999 under alternative scenarios for GDP growth and foreign capital inflows. Our main objective is to estimate the real exchange rate devaluation required for the country's external adjustment. Our simulations are based on the Quarterly Model of the Balance of Payments developed by the Department of Macroeconomics at IPEA.

Abstract:
Due to the high levels of uncertainty arising from high inflation, on the eve of the Real Plan Brazilian public debt was mainly composed of indexed bonds with very short maturities. As the stabilization program proved successful, it became possible to start changing the debt's composition; thus, between July 1994 and October 1997 public debt-managing authorities aimed to increase the debt's average maturity by issuing nominal securities with increasing maturities. In this paper we analyze this debt-management strategy. The underlying argument is that the increase in the debt's average maturity must lead to higher debt-financing costs, as longer-term securities pay higher interest rates. We first discuss the theoretical reasons for the higher risk premia in long securities as compared to shorter ones and show that in order to increase the proportion of long-term securities in total debt government must raise interest differentials even further. We then estimate the effects of such strategy in Brazil in the period following the Real Plan.

Abstract:
Based on three versions of a small macroeconomic model for Brazil, this paper presents empirical evidence on the effects of parameter uncertainty on monetary policy rules and on the robustness of optimal and simple rules over different model specifications. By comparing the optimal policy rule under parameter uncertainty with the rule calculated under purely additive uncertainty, we find that parameter uncertainty should make policymakers react less aggressively to the economy's state variables, as suggested by Brainard's "onservatism principle", although this effect seems to be relatively small. We then informally investigate each rule's robustness by analyzing the performance of policy rules derived from each model under each one of the alternative models. We find that optimal rules derived from each model perform very poorly under alternative models, whereas a simple Taylor rule is relatively robust. We also find that even within a specific model, the Taylor rule may perform better than the optimal rule under particularly unfavorable realizations from the policymaker's loss distribution function.

Abstract:
From July 1994 to October 1997 Brazilian public debt-managing authorities aimed to increase the debt's average maturity by issuing nominal securities with increasing maturities. In this paper we apply a model to analyze the effects that changes in the debt's average maturity might have on assets returns. The model elucidates the reasons for the higher risk premia in long securities as compared to shorter ones and shows that in order to increase the proportion of long-term securities in total debt government must raise interest differentials even further. When applied to the Brazilian case, the model is able to explain a significant proportion of observed movements in securities risk premia.

Debt, maturity, management

Abstract:
This paper studies the medium run prospects ? up to 2003 ? for Brazilian foreign liabilities based on an analytical framework that calculates the current account balance required to stabilize the ratio foreign liabilities/exports. We project the behavior of the main current account variables under alternative world trade growth and GDP growth scenarios. Sustainability of Brazil's foreign indebtedness is shown to depend crucially on world trade, which imposes a limit to sustainable domestic growth.