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The Economic Determinants of the Brazilian Nominal Term Structure of Interest Rates

Applied Economics, Vol. 42, No. 1, pp.1-10, January 2010

Colorado College Working Paper 2006-06

33 Pages Posted: 7 Nov 2006 Last revised: 19 Oct 2010

Denisard C. O. Alves Sr.

University of Sao Paulo (USP)

Rodrigo Sekkel

Johns Hopkins University - Department of Economics

Date Written: October 1, 2006

Abstract

The purpose of this study is to identify the effects of monetary policy and macroeconomic shocks on the dynamics of the Brazilian term structure of interest rates. We estimate a near-VAR model under the identification scheme proposed by Christiano et al. (1996, 1999). The results resemble those of the US economy: monetary policy shocks flatten the term structure of interest rates. We find that monetary policy shocks in Brazil explain a significantly larger share of the dynamics of the term structure than in the USA. Finally, we analyze the importance of standard macroeconomic variables (e.g., GDP, inflation, and measure of country risk) to the dynamics of the term structure in Brazil.

Keywords: term structure, Brazil, interest, VAR, monetary policy

JEL Classification: E43, E40

Suggested Citation

Alves, Denisard C. O. and Sekkel, Rodrigo, The Economic Determinants of the Brazilian Nominal Term Structure of Interest Rates (October 1, 2006). Colorado College Working Paper 2006-06. Available at SSRN: https://ssrn.com/abstract=942808 or http://dx.doi.org/10.2139/ssrn.942808

Denisard C. O. Alves Sr. (Contact Author)

University of Sao Paulo (USP) ( email )

Sao Paolo, 05508-010
Brazil

Rodrigo Sekkel

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States

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