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 ()

International Journal of Political Economy, 2018, vol. 47, issue 2, 178-198

Abstract: This article discusses the determinants of 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. A panel regression with 11 developing countries over the period 1996–2015 is estimated to test these hypotheses. The conclusion is that, although the orthodox and heterodox arguments are both coherent, when comparing stylized facts and testing the hypotheses econometrically neither is sufficient to elucidate the Brazilian case. The article concludes by suggesting that there might be political causes of the high real interest rates in Brazil such as a politically influential rentier class.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://hdl.handle.net/10.1080/08911916.2018.1497580 (text/html)
Access to full text is restricted to subscribers.

Related works:
Working Paper: 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 (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:ijpoec:v:47:y:2018:i:2:p:178-198

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MIJP20

DOI: 10.1080/08911916.2018.1497580

Access Statistics for this article

More articles in International Journal of Political Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().