The Natural Rate of Interested in Brazil Between 1999 and 2005
The aim of the present study is to estimate the level of the natural rate of interest in Brazil after the implementation of the inflation targeting regime. Miranda and Muinhos (2003), Arida, Bacha and Lara-Resende (2005), Gonçalves, Holland and Spacov (2005) and Muinhos and Nakane (2006) investigated the major reasons for the persistently high levels of real interest rates in Brazil. The present study introduces three different estimates for the behavior of long-term interest rates in Brazil. First of all, the definition of the natural rate of interest is analyzed in a time perspective, highlighting the importance of this issue to the conduct of present-day Brazilian monetary policy. In a second moment, statistical filters are used for the ex ante and ex post real interest series, followed by the estimation of a dynamic Taylor rule, which allows obtaining the real interest rate implicit in the monetary policy decisions made by the Brazilian Central Bank after the implementation of the inflation targeting regime. These estimates are eventually compared with the natural rate of interest obtained from a simplified macroeconomic state-space model, as proposed by Laubach and Williams (2003). The results indicate that monetary policy decisions caused the level of the real interest rate to fluctuate around that of the natural rate of interest, showing that the Brazilian monetary authority assumed a policy-neutral stance in most of the analyzed period.
Volume (Year): 63 (2009)
Issue (Month): 2 (June)
|Contact details of provider:|| Postal: Praia de Botafogo 190, sala 1100, Rio de Janeiro/RJ - CEP: 22253-900|
Web page: http://epge.fgv.br
More information through EDIRC
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.:
- Fernando M. Gonçalves & Márcio Holland & Andrei D. Spacov, 2005. "Can Jurisdictional Uncertainty And Capital Controls Explain The High Level Of Real Interest Rates In Brazil? Evidence From Panel Data," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33th Brazilian Economics Meeting] 028, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
- 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.
- Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
- Clarida, Richard & Galí, Jordi & Gertler, Mark, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," CEPR Discussion Papers 2139, C.E.P.R. Discussion Papers.
- Clarida, R. & Gali, J. & Gertler, M., 1999. "The Science of Monetary Policy: A New Keynesian Perspective," Working Papers 99-13, C.V. Starr Center for Applied Economics, New York University.
- Richard Clarida & Jordi Gali & Mark Gertler, 1999. "The Science of Monetary Policy: A New Keynesian Perspective," NBER Working Papers 7147, National Bureau of Economic Research, Inc.
- Tejada, César A. O. & Portugal, Marcelo S., 2002. "Credibility and Reputation: An Application of the External Circumstances Model for the Real Plan," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 56(4), October.
- Jeffery D. Amato, 2005. "The role of the natural rate of interest in monetary policy," BIS Working Papers 171, Bank for International Settlements.
- André Minella & Paulo Springer de Freitas & Ilan Goldfajn & Marcelo Kfoury Muinhos, 2003. "Inflation targeting in Brazil: lessons and challenges," BIS Papers chapters,in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 106-133 Bank for International Settlements.
- André Minella & Paulo Springer de Freitas & Ilan Goldfajn & Marcelo Kfoury Muinhos, 2002. "Inflation Targeting in Brazil: Lessons and Challenges," Working Papers Series 53, Central Bank of Brazil, Research Department.
- Daniel Leigh, 2005. "Estimating the Implicit Inflation Target; An Application to U.S. Monetary Policy," IMF Working Papers 05/77, International Monetary Fund.
- Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678-678.
- Jeffery D. Amato, 2005. "The Role of the Natural Rate of Interest in Monetary Policy," CESifo Economic Studies, CESifo, vol. 51(4), pages 729-755.
- Marcelo Kfoury Muinhos & Márcio I. Nakane, 2006. "Comparing equilibrium real interest rates: different approaches to measure Brazilian rates," Working Papers Series 101, Central Bank of Brazil, Research Department.
- Pedro Calhman de Miranda & Marcelo Kfoury Muinhos, 2003. "A Taxa de Juros de Equilíbrio: uma Abordagem Múltipla," Working Papers Series 66, Central Bank of Brazil, Research Department. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:fgv:epgrbe:v:63:y:2009:i:2:a:1035. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Núcleo de Computação da FGV/EPGE)
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.