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Brazil: monetary policy and the neutral interest rate

Author

Listed:
  • Cleomar Gomes da Silva
  • Rafael Cavalcanti de Araújo

Abstract

Purpose - The purpose of this paper is to analyze the conduct of monetary policy in Brazil and estimate the country’s neutral real interest rate. Design/methodology/approach - The authors make use of a state-space macroeconomic model representation. Findings - The period of analysis goes from 2003 up to the end of 2013 and the results show that the country’s natural rate of interest was around 4.2 percent in December 2013. Originality/value - One of the main differences of this work is the inclusion of variables such as the real exchange rate and world interest rate. This is important because these variables play an important role in the definition of the interest rate and, consequently, in the definition of the neutral interest rate.

Suggested Citation

  • Cleomar Gomes da Silva & Rafael Cavalcanti de Araújo, 2016. "Brazil: monetary policy and the neutral interest rate," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 43(6), pages 966-979, November.
    • Handle: RePEc:eme:jespps:jes-10-2014-0168
    DOI: 10.1108/JES-10-2014-0168
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    More about this item

    Keywords

    Monetary policy; Natural rate of interest; State-space models; E43; E52; C22;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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