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Asymmetric transmission of monetary policy on disaggregated inflation: lessons from Brazil

Author

Listed:
  • Rafael S. M. Ribeiro

  • Gilberto Tadeu Lima

  • Gustavo Pereira Serra

  • Marina Sanches

Abstract

This article examines the impact of restrictive monetary policy, specifically an increase in the benchmark interest rate (Selic), on inflation rates across different consumption groups in Brazil, as measured by the Extended National Consumer Price Index (IPCA). The Central Bank of Brazil uses the Selic rate to align inflation with its target. The study uses the Local Projections model on data from January 2007 to December 2023 to analyze how inflation in various groups and subgroups responds to changes in the Selic rate. Findings indicate that an increase in the Selic rate reduces inflation in groups like "Food and beverages", "Household items", and "Clothing", but has little effect on "Housing" and "Communication". This research highlights the need for tailored economic policies for different consumption segments, illustrated by a case during the COVID-19 pandemic.

Suggested Citation

  • Rafael S. M. Ribeiro & Gilberto Tadeu Lima & Gustavo Pereira Serra & Marina Sanches, 2024. "Asymmetric transmission of monetary policy on disaggregated inflation: lessons from Brazil," Working Papers, Department of Economics 2024_24, University of São Paulo (FEA-USP).
    • Handle: RePEc:spa:wpaper:2024wpecon24
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    References listed on IDEAS

    as
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    2. S. Borağan Aruoba & Thomas Drechsel, 2024. "The Long and Variable Lags of Monetary Policy: Evidence from Disaggregated Price Indices," NBER Chapters, in: Inflation in the COVID Era and Beyond, National Bureau of Economic Research, Inc.
    3. John B. Taylor, 1995. "The Monetary Transmission Mechanism: An Empirical Framework," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 11-26, Fall.
    4. Débora Pimentel & Viviane Luporini & André Modenesi, 2016. "Assimetrias No Repasse Cambial Para A Inflação: Uma Análise Empírica Para O Brasil (1999 A 2013)," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 056, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    5. Christoph Lauper & Giacomo Mangiante, 2025. "Monetary Policy Shocks and Inflation Inequality," International Journal of Central Banking, International Journal of Central Banking, vol. 21(4), pages 135-190, October.
    6. José Luis Montiel Olea & Mikkel Plagborg‐Møller, 2021. "Local Projection Inference Is Simpler and More Robust Than You Think," Econometrica, Econometric Society, vol. 89(4), pages 1789-1823, July.
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    Keywords

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    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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