Implications of public debt indexation for monetary policy transmission

Joaquim Pinto de Andrade and Manoel Carlos de Castro Pires ()
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Joaquim Pinto de Andrade: Brasília University (UnB)

Journal of Applied Economics, 2011, vol. 14, 257-268

Abstract: The goal of this paper is to provide a better understanding of monetary policy effectiveness in the case of indexed bonds. When public debt management deals with bonds indexed to the interest rate set by the monetary policy, there is no wealth effect and, as a consequence, monetary policy has a weak transmission channel reducing its effectiveness. This can help to explain why monetary policy in Brazil has been so tight and interest rates so high during the Real Plan.

Keywords: wealth effect; monetary policy; indexation; public debt management (search for similar items in EconPapers)
JEL-codes: E32 E43 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:cem:jaecon:v:14:y:2011:n:2:p:257-268

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