Patience and Brazil’s Real Interest Rate Puzzle

Orientador(a): Yvan Becard

Co-orientador(a): Márcio Garcia

Brazil has exhibited persistently high real interest rates for decades relative to both advanced and emerging economies, a pattern that standard explanations based on fiscal fragility, sovereign risk, inflation history, and financial distortions do not fully account for. This dissertation investigates a channel that complements this literature: differences in household patience. Using evidence from the Global Preferences Survey, I document that Brazil displays a lower willingness to postpone consumption than the United States. To assess the quantitative relevance of this fact, I use a representative-agent model and, subsequently, a heterogeneous-agent model with incomplete markets, idiosyncratic income risk, and borrowing constraints, based on Aiyagari (1994). The results show that patience has a quantitatively meaningful effect on the equilibrium real interest rate. When Brazil is counterfactually assigned the U.S. level of patience, its real interest rate falls from 9.23% to 7.00%, accounting for about 30.5% of the observed differential between the two countries. In an exercise directly disciplined by the Gallup evidence, differences in the composition of more and less patient households explain about 34% of this gap. I also show that the incidence of hand-to-mouth households constitutes an additional relevant channel: when Brazil is brought closer to the share observed in the United States, the real interest rate falls by a further 1.2 percentage points, accounting for about 16% of the differential. Taken together, the two channels explain approximately 46% of the Brazil–U.S. gap. The results suggest that Brazil’s real interest rate reflects not only fiscal, monetary, and institutional factors, but also lower average patience and a higher incidence of hand-tomouth households.