Is the public sector of your country a diffusion borrower? Empirical evidence from Brazil

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April 2016
Paper author(s): 
Leno S. Rocha
Frederico S. A. Rocha
Th´arsis T. P. Souza
Institutions and Development

We propose a diffusion process to describe the global dynamic evolution of credit operations at a national level given observed operations at a subnational level in a sovereign country. Empirical analysis with a unique dataset from Brazilian federate constituents supports the conclusions. Despite the heterogeneity observed in credit operations at a subnational level, the aggregated dynamics at a national level were accurately described with the proposed model. Results may guide management of public finances, particularly debt manager authorities in charge of reaching surplus targets.


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