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Monetary Channels in Brazil through the Lens of a Semi-Structural Model

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Author Info
André Minella
Nelson F. Souza-Sobrinho

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Abstract

We develop and estimate a medium-size, semi-structural model for Brazil's economy during the inflation targeting period. The model captures key features of the economy, and allows us to investigate the transmission mechanisms of monetary policy. We decompose the monetary channels into household interest rate, firm interest rate, and exchange rate channels. We find that the household interest rate channel plays the most important role in explaining output dynamics after a monetary policy shock. In the case of inflation, however, both the household interest rate and the exchange rate channels are the main transmission mechanisms. Furthermore, using a proxy for an expectation channel, we also find that this channel is key in the transmission of monetary policy to inflation.

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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 181.

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Date of creation: Apr 2009
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Handle: RePEc:bcb:wpaper:181

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  1. André Minella & Paulo Springer de Freitas & Ilan Goldfajn & Marcelo Kfoury Muinhos, 2003. "Inflation Targeting in Brazil: Constructing Credibility under Exchange Rate Volatility," Working Papers Series 77, Central Bank of Brazil, Research Department. [Downloadable!]
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  2. Bernanke, Ben & Gertler, Mark, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Working Papers 95-15, C.V. Starr Center for Applied Economics, New York University. [Downloadable!]
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  3. Obstfeld, Maurice & Rogoff, Kenneth, 1995. "The Mirage of Fixed Exchange Rates," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 73-96, Fall. [Downloadable!] (restricted)
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  4. Taylor, John B, 1995. "The Monetary Transmission Mechanism: An Empirical Framework," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 11-26, Fall. [Downloadable!] (restricted)
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  5. Marco Espinosa-Vega & Alessandro Rebucci, 2003. "Retail Bank Interest Rate Pass-Through: Is Chile Atypical?," IMF Working Papers 03/112, International Monetary Fund. [Downloadable!]
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  6. Elcyon Caiado Lima & Alexis Maka & Brisne Céspedes, 2008. "Monetary Policy, Inflation and the Level of Economic Activity in Brazil After the Real Plan: Stylized Facts from SVAR Models," Revista Brasileira de Economia, Graduate School of Economics, Getulio Vargas Foundation (Brazil), vol. 62(2), pages 123-160, October. [Downloadable!]
  7. Meltzer, Allan H, 1995. "Monetary, Credit and (Other) Transmission Processes: A Monetarist Perspective," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 49-72, Fall. [Downloadable!] (restricted)
  8. A. R. Pagan & Luis Catão & Douglas Laxton, 2008. "Monetary Transmission in an Emerging Targeter: The Case of Brazil," IMF Working Papers 08/191, International Monetary Fund. [Downloadable!]
  9. Weth, Mark A., 2002. "The pass-through from market interest rates to bank lending rates in Germany," Discussion Paper Series 1: Economic Studies 2002,11, Deutsche Bundesbank, Research Centre. [Downloadable!]
  10. Souza-Sobrinho, Nelson, 2003. "Uma Avaliação do Canal de Crédito no Brasil
    [An Assessment of the Credit Channel in Brazil]    ," MPRA Paper 5160, University Library of Munich, Germany. [Downloadable!]
  11. Neumeyer, Pablo A. & Perri, Fabrizio, 2005. "Business cycles in emerging economies: the role of interest rates," Journal of Monetary Economics, Elsevier, vol. 52(2), pages 345-380, March. [Downloadable!] (restricted)
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  12. Mishkin, Frederic S, 1995. "Symposium on the Monetary Transmission Mechanism," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 3-10, Fall. [Downloadable!] (restricted)
  13. André Minella & Paulo Springer de Freitas & Ilan Goldfajn & Marcelo Kfoury Muinhos, 2003. "Inflation Targeting in Brazil: Constructing Credibility Under Exchange Rate Volatility," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31th Brazilian Economics Meeting] b26, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]. [Downloadable!]
  14. André Minella, 2003. "Monetary Policy and Inflation in Brazil (1975-2000): A VAR Estimation," Revista Brasileira de Economia, Graduate School of Economics, Getulio Vargas Foundation (Brazil), vol. 57(3), April. [Downloadable!]
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  15. Tony Takeda & Fabiana Rocha & Márcio I. Nakane, 2005. "The Reaction of Bank Lending to Monetary Policy in Brazil," Revista Brasileira de Economia, Graduate School of Economics, Getulio Vargas Foundation (Brazil), vol. 59(1), April.
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  16. Agnes Belaisch, 2003. "Exchange Rate Pass-Through in Brazil," IMF Working Papers 03/141, International Monetary Fund.
  17. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October. [Downloadable!] (restricted)
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