Public debt management and credibility: Evidence from an emerging economy

This study is a contribution to the literature concerning the management of the public debt in emerging economies. A novelty in this article is the introduction of a fiscal credibility index based on the market's expectations in regard to the public debt to GDP ratio. The main objective is to present empirical evidence for the Brazilian case concerning the framework of the public debt composition and also the effect of this framework on public debt to GDP ratio. The findings demonstrate that the commitment with the public debt increases the fiscal credibility and that it is crucial for the success of the management of the public debt. Contrary to what is recommended in the standard literature an increase in the average maturity and the share of inflation-linked bonds imply costs that cannot be neglected. (c) 2012 Elsevier B.V. All rights reserved.