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


  • Yu Hsing

    () (Southeastern Louisiana University)


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.

Suggested Citation

  • Yu Hsing, 2003. "Impact of external debt and other macroeconomic policies on output in Brazil: a var approach," Revista de Analisis Economico – Economic Analysis Review, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines, vol. 18(2), pages 97-108, December.
  • Handle: RePEc:ila:anaeco:v:18:y:2003:i:2:p:97-108

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    References listed on IDEAS

    1. 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. 4, pages 89-105, May.
    2. Ahmed, Shaghil, 2003. "Sources of economic fluctuations in Latin America and implications for choice of exchange rate regimes," Journal of Development Economics, Elsevier, vol. 72(1), pages 181-202, October.
    3. 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.
    4. Bevilaqua, Afonso S & Garcia, Marcio G P, 2002. "Debt Management in Brazil: Evaluation of the Real Plan and Challenges Ahead," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(1), pages 15-35, January.
    5. Hoffmaister, Alexander W. & Roldos, Jorge E., 2001. "The Sources of Macroeconomic Fluctuations in Developing Countries: Brazil and Korea," Journal of Macroeconomics, Elsevier, vol. 23(2), pages 213-239, April.
    6. 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.
    7. 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 357-384, March.
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    Cited by:

    1. Yu Hsing, 2004. "Response of Venezuelan output to monetary policy, deficit spending, and currency depreciation: a VAR model," REVISTA DE ECONOMÍA DEL ROSARIO, UNIVERSIDAD DEL ROSARIO, December.
    2. Hsing, Y., 2004. "Responses of Argentine Output to Shocks to Monetary Policy, Fiscal Policy and Exchange Rates: A VAR Model," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 4(1).
    3. Rasaki, Mutiu Gbade & Malikane, Christopher, 2015. "Macroeconomic shocks and fluctuations in African economies," Economic Systems, Elsevier, vol. 39(4), pages 675-696.

    More about this item


    Var model; external debt; exchange rates; monetary policy;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • H6 - Public Economics - - National Budget, Deficit, and Debt


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