Monetary policy channels in Brazil through the lens of a semi-structural model

André Minella () and Nelson Sobrinho

Economic Modelling, 2013, vol. 30, issue C, 405-419

Abstract: We develop and estimate a medium-sized, semi-structural model for the Brazilian economy during the inflation targeting period. The model describes fairly well key features of the economy and allows us to decompose the transmission mechanism of monetary policy. In the baseline decomposition, the transmission mechanism is broken down into household interest rate, firm interest rate, and exchange rate channels. In addition, we carry out an alternative decomposition that allows us to evaluate the expectations channel as well. In both procedures, the household interest rate channel is the most important for explaining the response of output to a monetary policy shock. In the baseline decomposition of inflation, both the household interest rate and the exchange rate channels are the main transmission channels. However, in the alternative decomposition, the expectations channel accounts for the bulk of the inflation response.

Keywords: Monetary policy transmission mechanism; Semi-structural model; Brazil (search for similar items in EconPapers)
JEL-codes: C51 E17 E52 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:30:y:2013:i:c:p:405-419

DOI: 10.1016/j.econmod.2012.04.027

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