Monetary correction of interests of the internal debt

Vol. 9 No. 3 (1989)

Jul-Sep / 1989
Published July 1, 1989
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Alves, Sílvio Rodrigues. 1989. “Monetary Correction of Interests of the Internal Debt”. Brazilian Journal of Political Economy 9 (3):370-85. https://doi.org/10.1590/0101-31571989-1432.

Monetary correction of interests of the internal debt

Sílvio Rodrigues Alves
Departamento Econômico do Banco Central do Brasil.
Brazilian Journal of Political Economy, Vol. 9 No. 3 (1989), Jul-Sep / 1989, Pages 370-385

Abstract

The aim of this paper is to defend the viewpoint that, in the same way as the
amortizations payments don’t represent part of the public sector debt, the monetary correction
of the debt and other similar charges shouldn’t be considered as part of this deficit. This
assertion should be even more emphasized in the case of countries with high inflation rates
where expenditures with monetary indexation and other similar charges became, progressively,
a bigger share of the Gross Domestic Product. Regarding to a better understanding of
the Government’s real financial situation, an adjustment was done at the national account
series. In this sense, and in order to work out the fiscal policy, the amount corresponding to
the monetary correction was excluded from the expenditure of domestic debt charges. This
meant that monetary indexation in a context of high inflation rates is better classified as
principal rather than debt charge. It is important to note that this paper is based on a previous
one, also by Sílvio Rodrigues Alves, entitled “O Desafio do Déficit Público”, published
in Revista de Economia Política n.” 30 (April-June/1988). Afterwards, in June 1988, the same viewpoint was defended by Mr. Blezer, Mr. Tanzi and Mr. Teijeiro in the paper “The Effects
of Inflation on the Measurement of Fiscal Deficits” (Occasional Paper 59, International
Monetary Fund, Washington, D.C., June 1988).

JEL Classification: H63


Keywords: public debt debt management monetary correction