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Financial market reaction to central bank monetary policy communications under an inflation- targeting regime: the case of Brazil

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  • Caldas M., Gabriel

Abstract

Central bank communications are important for guiding expectations. For emerging countries, however, research on this issue is scarce. Because Brazil represents an important emerging country under inflation targeting, this paper studies the influence of monetary policy and central bank communications on the term structure of interest rates in Brazil. The study uses ordinary least squares (ols), generalized method of moments (gmm) and vector autoregresion (var) to examine the direction taken by interest rates when affected by central bank communications and monetary policy. The study finds evidence that because economic agents analyse the minutes of the Monetary Policy Committee meetings, monetary policy and central bank communications significantly influence the process of expectations formation for interest rates with different maturities in Brazil.

Suggested Citation

  • Caldas M., Gabriel, 2012. "Financial market reaction to central bank monetary policy communications under an inflation- targeting regime: the case of Brazil," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.
  • Handle: RePEc:ecr:col070:11599
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Alicia Garcia-Herrero & Eric Girardin & Arnoldo Lopez-Marmolejo, 2019. "Mexico¡¯s Monetary Policy Communication and Money Markets," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 11(2), pages 81-97, February.
    2. Alicia Garcia-Herrero & Eric Girardin & Arnoldo Lopez Marmolejo, 2015. "Mexico’s monetary policy communication and money markets," Working Papers 1515, BBVA Bank, Economic Research Department.
    3. Helder Ferreira de Mendonça & Ivando Faria, 2015. "Brazilian Central Bank communication and interest rate expectations," Macroeconomics and Finance in Emerging Market Economies, Taylor & Francis Journals, vol. 8(1-2), pages 25-44, July.
    4. Alicia Garcia-Herrero & Eric Girardin & Enestor Dos Santos, 2015. "Follow what I do and also what I say: monetary policy impact on Brazil’s financial markets," Working Papers 1512, BBVA Bank, Economic Research Department.
    5. Alicia Garcia-Herrero & Eric Girardin & Arnoldo Lopez-Marmolejo, 2019. "Mexico’s Monetary Policy Communication and Money Markets," Post-Print hal-02402656, HAL.

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