Monetary Policy and Inflation in Brazil (1975-2000): A VAR Estimation
Banco Central do Brasil Working Paper No. 33
35 Pages Posted: 12 Feb 2002
Date Written: November 2001
This paper investigates monetary policy and basic macroeconomic relationships involving output, inflation rate, interest rate, and money in Brazil. Based on a vector autoregressive (VAR) estimation, it compares three different periods: moderately-increasing inflation (1975-1985), high inflation (1985-1994), and low inflation (1994-2000). The main results are the following: (1) monetary policy shocks have significant effects on output; (2) monetary policy shocks do not induce a reduction in the inflation rate in the first two periods, but there are indications that they have gained power to affect prices after the Real Plan was launched; (3) monetary policy does not usually respond rapidly or actively to inflation-rate and output innovations; (4) in the recent period, the interest rate responds intensely to financial crises; (5) positive interest-rate shocks are accompanied by a decline in money in all the three periods; (6) the degree of inflation persistence is substantially lower in the recent period.
Keywords: monetary policy, inflation, interest rate, money, Brazil
JEL Classification: E31, E52
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Latent Indexation and Exchange Rate Passthrough
By Antonio Fiorencio and Ajax R. Moreira
Monetary Transmission in an Emerging Targeter: The Case of Brazil
By A. R. Pagan, Luis Catão, ...
About the Existence of Common Internal Causes of Recent Latin American Currency Crises
Is Monetary Policy Effective When Credit is Low?
By Ana Carolina Saizar and Nigel Chalk
The Effects of Monetary Policy in Brazil: Results from Agnostic Identification
By Mario Jorge Cardoso Mendonca, Luis Medrano, ...
Fiscal and Monetary Policy Interaction: A Simulation-Based Analysis of a Two-Country New Keynesian DSGE Model with Heterogeneous Households
Financial Liberalization and the Stability of Currency Pegs