Three essays on public finance

This thesis consists of three essays on public finance written as papers. The first paper, Local Currency Sovereign Debt Markets, Global Financial Conditions and the Role of Foreign Investors, studies how the presence of foreign investors in local currency sovereign debt markets contributes to the transmission of global financial conditions to emerging market economies. Its estimations indicate that the higher the share of local currency government bonds held by foreign investors, the more sensitive the credit risk of these bonds becomes to global financial shocks. The second paper, IMF Programs and Borrowing Costs: Does Size Matter?, studies whether IMF programs and their size affect borrowing costs by comparing the coupon of bonds issued around an IMF arrangement. By comparing bonds issued immediately before the inset of the program with bonds issued immediately after the program, it shows that, on average, the approval of the program leads to a significant reduction in borrowing costs and program size matters. The third paper, The Use of Public Banks in Election Campaigns, studies how politics influence credit allocation by public banks in Brazil during elections and provides evidence of tactical redistribution (i.e., the channeling of resources into strategic electoral areas). Its estimates indicate that tactical redistribution occurs in episodes of total credit contraction, especially during federal election cycles.