Caroline Jorge

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Analysis of Brazilian National Treasury Primary Auctions in the 2000s: an MMT interpretation

There are many factors to consider when discussing the impact of the stock of domestic public debt on long-term interest rates and the government´s ability to issue obligations at said rates. Primary factors include the stock of debt relative to GDP, as it is argued that large stocks of government domestic debt relative to GDP cause market participants to distrust the government´s ability to honor future payments, which in turn exerts upward pressure on the interest rate and may hinder the Government´s ability to finance itself. In this view, investors in public bonds would have bargaining power to “reject” some types of bonds and/or to “accept” buying them only at high interest rates. They would be “bond vigilantes” that could cause difficulties in rolling-over the debt and pressure interest rates to move higher. This “vigilance” would be reinforced by the International Rating Agencies, whose downgrades would increase the pressure on…

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