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Can credibility offset electricity price effect on business confidence? An empirical investigation from a large emerging economy

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  • Helder Ferreira de Mendonça
  • Eduardo Schirmer Finn

Abstract

We analyse the ‘offsetting effect’ that the central bank credibility can have in mitigating the harmful effects of the increase in electricity price on business confidence. Based on data from the Brazilian economy from 2010 to 2019, we perform several regressions with different specifications and methods, taking into account aggregate level and the eleven industrial sectors with higher electricity consumption. In general, our findings support the view that an increase in electricity price harms business confidence, but there is an ‘offsetting effect’ when central bank credibility increases.

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  • Helder Ferreira de Mendonça & Eduardo Schirmer Finn, 2022. "Can credibility offset electricity price effect on business confidence? An empirical investigation from a large emerging economy," Applied Economics, Taylor & Francis Journals, vol. 54(11), pages 1229-1242, March.
    • Handle: RePEc:taf:applec:v:54:y:2022:i:11:p:1229-1242
    DOI: 10.1080/00036846.2021.1975031
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