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Monetary policy channels in Brazil through the lens of a semi-structural model

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  • Minella, André
  • Souza-Sobrinho, Nelson F.

Abstract

We develop and estimate a medium-sized, semi-structural model for the Brazilian economy during the inflation targeting period. The model describes fairly well key features of the economy and allows us to decompose the transmission mechanism of monetary policy. In the baseline decomposition, the transmission mechanism is broken down into household interest rate, firm interest rate, and exchange rate channels. In addition, we carry out an alternative decomposition that allows us to evaluate the expectations channel as well. In both procedures, the household interest rate channel is the most important for explaining the response of output to a monetary policy shock. In the baseline decomposition of inflation, both the household interest rate and the exchange rate channels are the main transmission channels. However, in the alternative decomposition, the expectations channel accounts for the bulk of the inflation response.

Suggested Citation

  • Minella, André & Souza-Sobrinho, Nelson F., 2013. "Monetary policy channels in Brazil through the lens of a semi-structural model," Economic Modelling, Elsevier, vol. 30(C), pages 405-419.
  • Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:405-419
    DOI: 10.1016/j.econmod.2012.04.027
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    Cited by:

    1. Agénor, Pierre-Richard & Pereira da Silva, Luiz A., 2014. "Macroprudential regulation and the monetary transmission mechanism," Journal of Financial Stability, Elsevier, vol. 13(C), pages 44-63.
    2. Arnildo Correa & Myrian Petrassi & Rafael Santos, 2018. "Price-Setting Behavior in Brazil: Survey Evidence," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 14(2), pages 283-310, November.
    3. Mr. Edward F Buffie & Luis-Felipe Zanna & Mr. Marco Airaudo, 2016. "Inflation Targeting and Exchange Rate Management In Less Developed Countries," IMF Working Papers 2016/055, International Monetary Fund.
    4. Castro, Marcos R. de & Gouvea, Solange N. & Minella, Andre & Santos, Rafael & Souza-Sobrinho, Nelson F., 2015. "SAMBA: Stochastic Analytical Model with a Bayesian Approach," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 35(2), March.
    5. Buffie, Edward F. & Zanna, Luis-Felipe, 2018. "Limited Asset Market Participation And Determinacy In The Open Economy," Macroeconomic Dynamics, Cambridge University Press, vol. 22(8), pages 1937-1977, December.
    6. Ozana Nadoveza Jelić & Rafael Ravnik, 2021. "Introducing Policy Analysis Croatian MAcroecoNometric Model (PACMAN)," Surveys 41, The Croatian National Bank, Croatia.
    7. Buffie, Edward F. & Airaudo, M. & Zanna, Felipe, 2018. "Inflation targeting and exchange rate management in less developed countries," Journal of International Money and Finance, Elsevier, vol. 81(C), pages 159-184.
    8. 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.
    9. Montes, Gabriel Caldas & Peixoto, Gabriel Barros Tavares, 2014. "Risk-taking channel, bank lending channel and the “paradox of credibility”," Economic Modelling, Elsevier, vol. 39(C), pages 82-94.
    10. Arnildo da Silva Correa & Myrian Beatriz S. Petrassi & Rafael Santos, 2016. "Price-Setting Behavior in Brazil: survey evidence," Working Papers Series 422, Central Bank of Brazil, Research Department.

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    More about this item

    Keywords

    Monetary policy transmission mechanism; Semi-structural model; Brazil;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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