Advanced Search
MyIDEAS: Login

Sailing through the Global Financial Storm: Brazil's recent experience with monetary and macroprudential policies to lean against the financial cycle and deal with systemic risks

Contents:

Author Info

  • Luiz Awazu Pereira da Silva
  • Ricardo Eyer Harris
Registered author(s):

    Abstract

    Brazil sailed well through the global financial storm, using counter-cyclical policies to engineer its fast V-shaped recovery in 2010. In order to deal with inflationary pressures arising from its strong recovery, after the peak of the crisis, it used standard aggregate demand management instruments (tight fiscal and monetary policies). Brazil had also to deal with the post-QE global environment of excess liquidity in 2010-2011 where excessive capital inflows were exacerbating domestic credit growth with potentially destabilizing effects for price and financial stability. In that front, Brazil maintained and strengthened its strong financial sector regulation and supervision to continue to ensure financial stability, in particular, using a set of macroprudential instruments. While combining monetary and macroprudential instruments to lean against the financial cycle, the Central Bank of Brazil has always made clear that macroprudential measures are not a substitute for monetary policy action and are primarily geared at addressing financial stability risks. In fact, many policy makers after the global financial crisis seem to see now a complementarity between macroprudential measures and monetary policy. Accordingly, the (new) separation principle seems to evolve into using two instruments (the central bank’s base rate and a set of macroprudential tools) to address two objectives (the inflation target and a composite set of financial stability indicators). Brazil’s recent experience with monetary and macroprudential policies is a successful example of this new approach. More time and other countries’ experiences are needed to assess properly if this policy option can be generalized and replicated with similar results elsewhere.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bcb.gov.br/pec/wps/ingl/wps290.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 290.

    as in new window
    Length:
    Date of creation: Aug 2012
    Date of revision:
    Handle: RePEc:bcb:wpaper:290

    Contact details of provider:
    Web page: http://www.bcb.gov.br/?english

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Agénor, P.-R. & Alper, K. & Pereira da Silva, L., 2012. "Capital requirements and business cycles with credit market imperfections," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 687-705.
    2. Pierre-Richard & K. Alper & L. Pereira da Silva, 2011. "Capital Requirements and Business Cycles with Credit Market Imperfections," Working Papers Series 231, Central Bank of Brazil, Research Department.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bcb:wpaper:290

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benjamin Tabak).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.