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Impact of external debt and other macroeconomic policies on output in Brazil: a var approach

  • Yu Hsing

    ()

    (Southeastern Louisiana University)

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This paper uses a VAR model to quantify the relative importance of external debt, exchange rates, monetary policy and other selected variables when explaining output fluctuations in Brazil. Using the money market rate as a policy instrument, impulse response functions indicate that shocks to the interest rate, the external debt, or the inflation rate have an inverse impact on output, while currency and stock prices shocks have a positive effect on economic activity. In the medium run, the explanatory power of the external debt rises while that of the money market rate and the real exchange rate decline. When money is considered as a monetary tool, output responds positively to shocks to the real monetary base or to stock prices and reacts inversely to shocks to the external debt, currency depreciation, or inflation. Therefore, the choice of different monetary policy tools is not neutral when affecting output.

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Article provided by Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines in its journal Revista de Analisis Economico.

Volume (Year): 18 (2003)
Issue (Month): 2 (December)
Pages: 97-108

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Handle: RePEc:ila:anaeco:v:18:y:2003:i:2:p:97-108
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  1. Gokce Soydemir, 2002. "The impact of the movements in US threemonth Treasury bill yields on the equity markets in Latin America," Applied Financial Economics, Taylor & Francis Journals, vol. 12(2), pages 77-84.
  2. Bevilaqua, Alfonso S. & Garcia, Marcio G. P., 2000. "Debt management in Brazil : evaluation of the Real Plan and challenges ahead," Policy Research Working Paper Series 2402, The World Bank.
  3. Shaghil Ahmed, 1999. "Sources of economic fluctuations in Latin America and implications for choice of exchange rate regimes," International Finance Discussion Papers 656, Board of Governors of the Federal Reserve System (U.S.).
  4. Hamilton, James D, 1989. "A New Approach to the Economic Analysis of Nonstationary Time Series and the Business Cycle," Econometrica, Econometric Society, vol. 57(2), pages 357-84, March.
  5. Francisco Carneiro & Jose Angelo & C. A. Divino & Carlos Rocha, 2002. "Revisiting the Fisher hypothesis for the cases of Argentina, Brazil and Mexico," Applied Economics Letters, Taylor & Francis Journals, vol. 9(2), pages 95-98.
  6. João R. Faria & Francisco Galrão Carneiro, 2001. "Does High Inflation Affect Growth in the Long and Short Run?," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 89-105, May.
  7. Jorge Roldos & Alexander W. Hoffmaister, 1996. "The Sources of Macroeconomic Fluctuations in Developing Countries; Brazil and Korea," IMF Working Papers 96/20, International Monetary Fund.
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