‘Cruzeiros’ auctions and discount rate for ‘new cruzeiros’

Vol. 11 No. 1 (1991)

Jan-Mar / 1991
Published January 1, 1991
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Giambiagi, Fábio. 1991. “‘Cruzeiros’ Auctions and Discount Rate for ‘new cruzeiros’”. Brazilian Journal of Political Economy 11 (1):153-56. https://doi.org/10.1590/0101-31571991-0605.

‘Cruzeiros’ auctions and discount rate for ‘new cruzeiros’

Fábio Giambiagi
Banco Nacional de Desenvolvimento Econômico e Social – BNDES e Universidade Federal do Rio de Janeiro – UFRJ, Rio de Janeiro/RJ, Brasil.
Brazilian Journal of Political Economy, Vol. 11 No. 1 (1991), Jan-Mar / 1991, Pages 153-156

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