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Monetary Policy And External Vulnerability In Brazil

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Author Info
Carlos Fernando Lagrota R. Lopes
Abstract

This paper analyses monetary policy in Brazil, investigating why interest rates were so high and volatile from 1995 to 1998. We identify in monetary policy an overreaction to external shocks, where exogenous changes in international liquidity triggered sharp movements on domestic interest rates. We also show that the Brazilian policy response to these shocks was far more intense than in Argentina and Mexico. We argue that Brazil was caught in a high interest rates trap, which culminated in a currency crisis in January 1999.

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Publisher Info
Paper provided by ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics] in its series Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] with number 071.

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Date of creation: 2004
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Handle: RePEc:anp:en2004:071

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Find related papers by JEL classification:
F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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  1. Clarida, Richard H, 2001. "The Empirics of Monetary Policy Rules in Open Economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 315-23, October. [Downloadable!] (restricted)
  2. Arminio Fraga & Ilan Goldfajn & Andre Minella, 2003. "Inflation Targeting in Emerging Market Economies," NBER Working Papers 10019, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Laurence Ball, 2000. "Policy Rules and External Shocks," NBER Working Papers 7910, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Richard Clarida, 2001. "The Empirics of Monetary Policy Rules in Open Economies," NBER Working Papers 8603, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  5. Richard Clarida & Jordi Gali & Mark Gertler, 1997. "Monetary Policy Rules in Practice: Some International Evidence," NBER Working Papers 6254, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Favero, Carlo A. & Scott, Alasdair, 2003. "Applied Macroeconometrics," Macroeconomic Dynamics, Cambridge University Press, vol. 7(02), pages 313-315, April. [Downloadable!]
  7. Graciela L. Kaminsky & Carmen Reinhart, 2003. "The Center and the Periphery: The Globalization of Financial Turmoil," NBER Working Papers 9479, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Carlo Ambrogio Favero & Francesco Giavazzi, . "Why are Brazil´s Interest Rates so High?," Working Papers 224, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University. [Downloadable!]
  9. Guillermo A. Calvo & Carmen M. Reinhart, 2000. "Fear of Floating," NBER Working Papers 7993, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  10. Eichengreen, B. & Masson, P. & Savastano, M. & Sharma, S., 1999. "Transition Strategies and Nominal Anchors on the Road to Greater Exchange-Rate Flexibility," Princeton Essays in International Economics 213, International Economics Section, Departement of Economics Princeton University,.
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