POLÍTICA MONETÁRIA, EXPECTATIVAS E DERIVATIVOS: UMA ANÁLISE DO BRASIL NO PERÍODO 1995-98

Abstract

The paper discusses the impacts of the information that arise from the interest rate derivatives on the conduct of the monetary policy in Brazil during 1995-98. The paper shows that the long-term rate of interest is determined by the level of the current short-term rate of interest (spot rate) plus expectations about its behavior on the future (the so-called forward short-rate) plus a risk premium. This premium is detennined by the (a) transaction costs of migrate from on portfolio to another; (b) degree of confidence on the expectations of the behavior of the short rate in the fijture; (c) date of realization of the investment; (d) degree of risk of capital aversion; and (e) duration of the portfolio. The paper shows that when considering derivatives in the economic environment, these expectations tend to be volatilized, and confidence crises become more huge. As a consequence, the risk premium becomes higher, lowering the ability of the central bank to determine the long-term rate. In the case of Brazil during 1995-98, the paper also shows that the worst evaluation of the economic scenario, as shown by the derivatives market, led to a difficult to keep even the spot rate in the level desired by the central bank.