br Concluding remarks br Acknowledgements I

Concluding remarks
Acknowledgements I am grateful to two anonymous referees and the editor for their helpful comments. This work was supported by a Grant-in-Aid for Scientific Research (No. 22330090) from the Ministry of Education, Culture, Sport, Science and Technology, Japan.
Introduction A recurring theme in the theory of fiscal policy is the fiscal imbalance due to an increase in the government debt. The increased level of indebtedness can imply negative impacts on the economy such as raising the cost of government funding, myeloperoxidase of private investment and thus a decrease in the potential economic growth (Lojsch et al., 2011). Moreover, excessive debt can lead to a situation of fiscal vulnerability which, in turn, threatens liquidity conditions and public debt solvency (Hemming et al., 2003). The fiscal vulnerability can be mitigated by a policy based on a tight fiscal policy (increase in taxes or decrease in government spending) as a way of generating primary surpluses. Another possibility for reducing fiscal vulnerability, such as pointed out by Giavazzi and Missale (2004), is the low cost government funding. Therefore, public debt management can be an important tool for reducing fiscal vulnerability (Angeletos, 2002). In particular, the dependence of term structure of interest rates to the state of the economy and the sensitivity of the market value of the government debt to the interest rate enables the public debt management to promote protection against shocks to the economy. When the fiscal trajectories are modified by shocks on the economy, a fall in the prices of government securities helps keep the intertemporal budget constraint. In other words, the market value of government debt equals the net present value of future primary surpluses thus maintaining fiscal solvency. One difficulty for this analysis as pointed out by Faraglia et al. (2008) is that the standard indicators for evaluating the performance of the public debt management do not allow one to observe a possible reduction in the fiscal vulnerability. According to these authors the use of fiscal insurance indicators open the doors for studies concerning public debt stabilization against fiscal shocks. This paper is a contribution for the analysis concerning fiscal insurance and public debt management through empirical evidence for one of the largest emerging economies. This analysis is especially important because traditionally the conduct of fiscal policy in emerging economies is considered permissive and thus the risk of a fiscal imbalance is high. Moreover, it is important to highlight that in a different way from Faraglia et al. (2008) who cannot use a time series approach due to a resulting problem of a lack of reliable inference, the analysis for Brazil is not subject to this problem. Since 1999, the Brazilian National Treasury announced a strategy for extending the maturity of federal securities and for improving the composition of government liabilities. As a result, key variables such as maturity and composition of debt change over time. This article is organized as follows: Section 2 depicts the data and the fiscal indicators. Section 3 presents the empirical evidence through OLS and GMM models regarding the effect of the management debt on fiscal insurance. Section 4 concludes the article.
Data and methodology As pointed out by Faraglia et al. (2008), most fiscal indicators in the literature fail in the analysis on the role of debt management in providing insurance against budget shocks as to stabilize the debt-to-GDP ratio. Under this view, a first indicator that is considered is the coupon payments (cp) and it is the result of the internal federal government nominal interest payments (interest) divided by federal domestic securities (debt), then Public debt stability is very important. As highlighted by Nosbusch (2008) it is desirable that an increase (decrease) in the interest rate due to a shock in the economy is offset by a decrease (increase) in the market value of government debt in order to protect the budget from shocks. Therefore, a second indicator is given by the ratio of market value of debt (MV) to GDP (Y),