A Closer Look at Sectoral Financial Linkages in Brazil I: Corporations' Financial Statements

Capital Controls, Macroprudential Measures and Monetary Policy Interactions in an Emerging Economy

“…The annual lending spread R L − R is calibrated to 4.3%, in line with the average difference between lending rate and the policy rate SELIC during 2005-2014; Brazilian foreign debt was 25% of GDP on average during 2000-2014, so rer·d * 4·gdp is set to 0.25: this implies θ 0 = 0.5606 and θ 1 = 3.9897; as standard, the foreign discount factor is calibrated at 0.99 24 ; bank survival probability is set to 0.912, implying a bank start-up fund equal 25 to ι b = 0.0003. As reported in Karpowicz et al (2016), in the Brazilian non-financial sector, the average equity/asset ratio is 42% during the period 2005-2015: this implies a steady-state entrepreneurs' leverage equal to 2.06, net of loans to domestic firms, resulting in a start-up fund parameter ι e = 0.0005; the entrepreneurs' steady-state default rate is set to 3.3% of total assets (annually) to match bank non-performing loans average from 2005 to 2014; this implies an idiosyncratic shock standard deviation σ e = 0.27; finally, I calibrate χ e at 0.95 26 and the monitoring cost µ = 0.2981 (as in Rannenberg (2016)).…”

Capital Controls, Macroprudential Measures and Monetary Policy Interactions in an Emerging Economy

“…The annual lending spread R L − R is calibrated to 4.3%, in line with the average difference between lending rate and the policy rate SELIC during 2005-2014; Brazilian foreign debt was 25% of GDP on average during 2000-2014, so rer•d * 4•gdp is set to 0.25: this implies θ 0 = 0.5606 and θ 1 = 3.9897; as standard, the foreign discount factor is calibrated at 0.99 24 ; bank survival probability is set to 0.912, implying a bank start-up fund equal 25 to ι b = 0.0003. As reported in Karpowicz et al (2016), in the Brazilian non-financial sector, the average equity/asset ratio is 42% during the period 2005-2015: this implies a steady-state entrepreneurs' leverage equal to 2.06, net of loans to domestic firms, resulting in a start-up fund parameter ι e = 0.0005; the entrepreneurs' steady-state default rate is set to 3.3% of total assets (annually) to match bank non-performing loans average from 2005 to 2014; this implies an idiosyncratic shock standard deviation σ e = 0.27; finally, I calibrate χ e at 0.95 26 and the monitoring cost µ = 0.2981 (as in Rannenberg (2016)).…”