Identification of Monetary Policy Shocks in the Brazilian Market for Bank Reserves
AbstractWe estimate an identified VAR (SVAR) with contemporaneous restrictions derived from a model of the market for bank reserves, which allows us to disentangle monetary policy shocks from demand shocks for reserves in Brazil. The main results are: i) the Central Bank of Brazil acts in order to smooth the bank reserve market interest rate (Selic); ii) the spread between the Selic rate and the discount rate provides information to estimate the demand curve for borrowed reserves; iii) overidentifying restrictions show that we cannot reject, for any period or model, the interest rate operational target hypothesis, even during the fixed exchange rate regime; iv) the impulse response functions show that shocks to the demand for reserves and to borrowed reserves generate statistically significant responses in real output and the inflation rate; v) all models display the liquidity effect and a small inflation rate puzzle.
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Bibliographic InfoPaper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 154.
Date of creation: Dec 2007
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Web page: http://www.bcb.gov.br/?english
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-01-05 (All new papers)
- NEP-CBA-2008-01-05 (Central Banking)
- NEP-MAC-2008-01-05 (Macroeconomics)
- NEP-MON-2008-01-05 (Monetary Economics)
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