Evaluating the Chilean Government’s Debt Denomination
This paper proposes a framework to assess the convenience of the current public debt denomination of the Chilean Government, through its implications on fiscal budget risk management. A “Value at Risk” methodology is proposed to compare alternative denominations regarding currency and interest rate. If the correlations found between the main factors affecting the fiscal result are valued at their point estimates, the exercise suggests that swapping the current debt denomination in fixed interest payments to variable payments indexed to Libor or government bond rates would significantly reduce fiscal results' volatility. The results also point to reduce current currency denomination in US dollars towards a stronger position in Euros or British Pounds. A more statistically rigorous analysis that considers the volatility of estimated correlations, however, recommends taking previous conclusions with caution.
Year of publication: |
2004-05
|
---|---|
Authors: | Albagli, Elías |
Institutions: | Banco Central de Chile |
Saved in:
freely available
Saved in favorites
Similar items by person
-
Errores de Proyección en Perspectiva
Albagli, Elías, (2003)
-
Labor Market Rigidity and Structural Shocks: An Open-Economy Approach for International Comparisons
Albagli, Elías, (2004)
-
Assessing the Flexibility of the Labor Market in Chile: An International Perspective
Albagli, Elías,
- More ...