HAVE WE REALLY “RUN OUT OF MONEY”? INTEREST RATES AND THE FINANCING OF PUBLIC EXPENDITURES IN A SOVEREIGN CURRENCY COUNTRY

ABSTRACT This paper discusses the financing of public expenditures and the determination of interest rates on short and long public bonds in a country that has monetary sovereignty. The analysis follows the exogenous interest rate approach that combines the notions of endogenous money of modern monetary theory and of functional finance from Lerner. Focusing particularly in the case of Brazil, the paper begins with the analysis of the operational procedures of government financing and the relationship between Treasury and the Central Bank, the relationship between government financing and the short and long term interest rates on public bonds. As a country (not just the public sector) can indeed go bankrupt in terms of foreign currency, this is followed by the analysis of the “sovereign risk” spread and its relationship with the external liabilities in foreign currency of the country (and not of the public sector) and a brief discussion of the relationship between the spread and the ratings of the international agencies. We conclude by very succinctly pointing out some implications of the above analysis to the recent discussion in Brazil (since 2015) on the need of a major “fiscal adjustment”.

摘要 本文探讨了拥有货币主权的国家的公共支出融资，以及短期与长期公共债券的利率决定问题。本分析采用外生利率研究范式，融合了现代货币理论中的内生货币核心概念与勒纳（Lerner）提出的功能财政理论。本文尤其聚焦巴西案例，首先分析了政府融资的操作流程、财政部与中央银行之间的关系，以及政府融资与公共债券短、长期利率之间的关联。由于一国（而非仅公共部门）确实可能因外币计价债务陷入破产困境，随后本文进一步分析了主权风险溢价（sovereign risk spread）及其与该国（而非公共部门）外币计价对外负债之间的关系，并简要讨论了该溢价与国际评级机构评级之间的关联。最后，本文简要指出了上述分析对巴西2015年以来围绕大规模“财政整顿”必要性展开的近期讨论的若干启示。