The Role of Interest Rates in the Brazilian Business Cycle

Nelson Sobrinho

No 218, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper offers additional insights on the relationship between interest rates and business cycles in Brazil. First, I document that Brazilian interest rates are very volatile, counter-cyclical and positively correlated with net exports, as observed in other emerging economies. Next, I present a dynamic general equilibrium model in which firms face working capital constraints and labor supply is independent of consumption. This parsimonious model, appropriately calibrated to the Brazilian economy, predicts that interest rate shocks can explain about one third of output fluctuations and generates business cycle regularities consistent with the Brazilian data.

Date: 2010-10
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: The Role of Interest Rates in the Brazilian Business Cycles (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bcb:wpaper:218

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