Why are policy real interest rates so high in Brazil? An analysis of the determinants of the Central Bank of Brazil's real interest rate

Thereza Balliester Reis ()

No 80/2016, IPE Working Papers from Berlin School of Economics and Law, Institute for International Political Economy (IPE)

Abstract: This paper discusses the reasons for Brazil.s high policy real interest rates by considering two opposing views, the orthodox and heterodox approaches. While orthodox authors defend the position that bad domestic policies are the cause of the high interest rate, heterodox economists claim that the international financial system and orthodox policies influence the level of the policy rate in Brazil. The aim of this study is to assess whether the proposed arguments can be supported when comparing Brazilian real interest rates with other developing countries under the same monetary regime. The conclusion is that, although the orthodox and heterodox arguments are both intuitively plausible, when comparing stylized facts and testing the hypotheses econometrically neither is sufficient to elucidate the Brazilian case. The paper concludes by suggesting that there might be political causes of the high real interest rates in Brazil such as a politically influential rentier class.

Keywords: Brazil; Central Bank; interest rate; monetary policy; developing countries (search for similar items in EconPapers)
JEL-codes: E43 E58 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cba, nep-hme, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Why Are Policy Real Interest Rates So High in Brazil? An Analysis of the Determinants of the Central Bank of Brazil’s Real Interest Rate (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ipewps:802016

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