Financial and Business Cycles in Brazil

29 Pages Posted: 7 Mar 2017

See all articles by Ivo Krznar

Ivo Krznar

International Monetary Fund (IMF)

Troy Matheson

Government of New Zealand - Department of Economics

Date Written: January 2017


This paper explores the nexus between the financial cycle and business cycle in Brazil. Cycles are estimated using a variety of commonly-used statistical methods and with a small, semistructural model of the Brazilian economy. An advantage of using the model-based approach is that financial and business cycles can be jointly estimated, allowing information from all key economic relationships to be used in a consistent way. The results show that Brazil is now in the downturn phase of the financial cycle. Moreover, the results underscore the importance of macro-financial linkages and highlight risks to the recovery going forward.

Keywords: Procyclicality of financial system, Brazil, Business cycles, Credit expansion, Private sector, Public sector, Financial risk, Parameter estimation, Econometric models, Financial cycle, business cycle, financial conditions index

JEL Classification: E30, E44, G10, G20

Suggested Citation

Krznar, Ivo and Matheson, Troy, Financial and Business Cycles in Brazil (January 2017). IMF Working Paper No. 17/12, Available at SSRN:

Ivo Krznar (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Troy Matheson

Government of New Zealand - Department of Economics ( email )

2 The Terrace
P.O. Box 2498
New Zealand

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