MONETARY POLICY AND EXTERNAL VULNERABILITY IN BRAZIL

Carlos Fernando Lagrota R. Lopes

Anais do XXXII Encontro Nacional de Economia [Proceedings of the 32th Brazilian Economics Meeting] from ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics]

Abstract: This paper analyses monetary policy in Brazil, investigating why interest rates were so high and volatile from 1995 to 1998. We identify in monetary policy an overreaction to external shocks, where exogenous changes in international liquidity triggered sharp movements on domestic interest rates. We also show that the Brazilian policy response to these shocks was far more intense than in Argentina and Mexico. We argue that Brazil was caught in a high interest rates trap, which culminated in a currency crisis in January 1999.

JEL-codes: F41 C52 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba and nep-mac
Date: 2004
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Persistent link: http://EconPapers.repec.org/RePEc:anp:en2004:071

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