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External Sustainability and Gross Positions: are Brazilian external accounts sustainable?

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  • João Barata R. B. Barroso

Abstract

This paper characterizes external sustainability in the presence of arbitrary gross international positions. The analysis is based on the response of net exports to net foreign liabilities, and is relevant for a growing literature using the same response function approach without any qualification for gross positions. In particular, we propose parametric and nonparametric formal tests for long run sustainability. We also develop a risk assessment methodology for medium run sustainability. We apply the method to the Brazilian economy, also building a new historical data set and a detailed offshore oil scenario which are of independent interest. The empirical results support external solvency and shows relatively well behaved risks of adjustment as judged by the historical experience.

Suggested Citation

  • João Barata R. B. Barroso, 2014. "External Sustainability and Gross Positions: are Brazilian external accounts sustainable?," Working Papers Series 362, Central Bank of Brazil, Research Department.
    • Handle: RePEc:bcb:wpaper:362
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    Cited by:

    1. Gustavo Adler & Sebastian Sosa, 2016. "External Factors in Debt Sustainability Analysis: An Application to Latin America?," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(5), pages 81-120, June.

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