Monetary Channels in Brazil through the Lens of a Semi-Structural Model

André Minella () and Nelson Souza-Sobrinho ()

No 181, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: We develop and estimate a medium-size, semi-structural model for Brazil's economy during the inflation targeting period. The model captures key features of the economy, and allows us to investigate the transmission mechanisms of monetary policy. We decompose the monetary channels into household interest rate, firm interest rate, and exchange rate channels. We find that the household interest rate channel plays the most important role in explaining output dynamics after a monetary policy shock. In the case of inflation, however, both the household interest rate and the exchange rate channels are the main transmission mechanisms. Furthermore, using a proxy for an expectation channel, we also find that this channel is key in the transmission of monetary policy to inflation.

New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2009-04
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Persistent link: http://EconPapers.repec.org/RePEc:bcb:wpaper:181

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