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Regras Monetárias e Dinâmica Macroeconômica no Brasil: Uma Abordagem de Expectativas Racionais

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  • Marco Antonio Bonomo
  • Ricardo D. Brito

Abstract

In this article, we estimate and simulate an open rational expectations macro model for the Brazilian economy. Our goal is to identify the features of optimal monetary rules and their consequences for the model's short-term dynamics. We compare the performance of three parametrizations of the monetary rule that differ with respect to the inflation variable: a Taylor rule, which is based on past inflation; a rule that combines past inflation and real exchange rate (Ball [3]); and a rule based on inflation forecasts (Bank of England [4]). We solve the model numerically and we use stochastic simulations to construct efficient frontiers on the inflation variance and output variance space. The sets of optimal rules for the two versions are qualitatively distinct. Since there is uncertainty about the economy's forward-lookingness, we propose a ranking of rules based on an equal weighted average of each model's objective function. The best-ranked rules according to this criterion have performance moderately inferior to the optimal rules, but prevent much larger losses that would occur when rules are chosen according to the wrong model.

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Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 28.

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Date of creation: Nov 2001
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Publication status: Published in Revista Brasileira de Economia, Vol. 56, no. 4 (Oct-Dec 2002).
Handle: RePEc:bcb:wpaper:28

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Web page: http://www.bcb.gov.br/?english

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  1. Bennett T. McCallum, 1997. "Issues in the Design of Monetary Policy Rules," NBER Working Papers 6016, National Bureau of Economic Research, Inc.
  2. Taylor, John B, 1979. "Staggered Wage Setting in a Macro Model," American Economic Review, American Economic Association, vol. 69(2), pages 108-13, May.
  3. Nicoletta Batini & Andrew Haldane, 1999. "Forward-Looking Rules for Monetary Policy," NBER Chapters, in: Monetary Policy Rules, pages 157-202 National Bureau of Economic Research, Inc.
  4. John B. Taylor, 1999. "A Historical Analysis of Monetary Policy Rules," NBER Chapters, in: Monetary Policy Rules, pages 319-348 National Bureau of Economic Research, Inc.
  5. Mark Gertler & Jordi Gali & Richard Clarida, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Journal of Economic Literature, American Economic Association, vol. 37(4), pages 1661-1707, December.
  6. Klein, Paul, 2000. "Using the generalized Schur form to solve a multivariate linear rational expectations model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(10), pages 1405-1423, September.
  7. Amato, Jeffery D. & Laubach, Thomas, 2003. "Rule-of-thumb behaviour and monetary policy," European Economic Review, Elsevier, vol. 47(5), pages 791-831, October.
  8. Wallis, Kenneth F, 1980. "Econometric Implications of the Rational Expectations Hypothesis," Econometrica, Econometric Society, vol. 48(1), pages 49-73, January.
  9. Marco Antonio Bonomo & Vinicius Carrasco & Humberto Moreira, 2000. "Aprendizado evolucionário, inércia inflacionária e recessão em desinflações monetárias," Textos para discussão 437, Department of Economics PUC-Rio (Brazil).
  10. John B. Taylor, 1999. "Monetary Policy Rules," NBER Books, National Bureau of Economic Research, Inc, number tayl99-1.
  11. John B. Taylor, 1999. "Introduction to "Monetary Policy Rules"," NBER Chapters, in: Monetary Policy Rules, pages 1-14 National Bureau of Economic Research, Inc.
  12. Binder,M. & Pesaran,H.M., 1995. "Multivariate Rational Expectations Models and Macroeconomic Modelling: A Review and Some New Results," Cambridge Working Papers in Economics 9415, Faculty of Economics, University of Cambridge.
  13. Simon Hall & Chris Salmon & Tony Yates & Nicoletta Batini, 1999. "Uncertainty and Simple Monetary Policy Rules - An illustration for the United Kingdom," Bank of England working papers 96, Bank of England.
  14. Wickens, Michael R, 1982. "The Efficient Estimation of Econometric Models with Rational Expectations," Review of Economic Studies, Wiley Blackwell, vol. 49(1), pages 55-67, January.
  15. David Blake, 1991. "The Estimation of Rational Expectations Models: A Survey," Journal of Economic Studies, Emerald Group Publishing, vol. 18(3), pages 31-70, September.
  16. Taylor, John B., 1999. "The robustness and efficiency of monetary policy rules as guidelines for interest rate setting by the European central bank," Journal of Monetary Economics, Elsevier, vol. 43(3), pages 655-679, June.
  17. McCallum, Bennett T, 1976. "Rational Expectations and the Natural Rate Hypothesis: Some Consistent Estimates," Econometrica, Econometric Society, vol. 44(1), pages 43-52, January.
  18. Bennett T. McCallum, 1999. "Recent developments in the analysis of monetary policy rules," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 3-12.
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