‘Cruzeiros’ auctions and discount rate for ‘new cruzeiros’
Abstract
This paper is an attempt to calculate which should be the discount of NCZ$
if the Brazilian Central Bank did auctions to convert them into Cr$. Using some simple
formulae of financial mathematics, it is shown that discount is a direct function of expected
market rate of interest and an inverted one of term up to the conversion from NCZ$ into
Cr$. Based on it, a matrix of results is made, which could be useful to isolate the discount
due exclusively to distrust from the whole discount. The most outstanding conclusion is that
discount could be high even within a context of full confidence, just because the expected
market rate of interest is high too.
JEL Classification: E31; E51.
Keywords: Monetary policy stabilization Collor Plan