EconPapers    
Economics at your fingertips  
 

Using a Money Demand Model to Evaluate Monetary Policies in Brazil

Pedro Albuquerque and Solange Gouvea

No 29, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: This paper uses a money demand model to evaluate monetary policies under different regimes in Brazil. The consistency between monetary liquidity and the inflation rate path is considered. The concept is applied to the Brazilian case by modeling M1 and its components. Based on unit root and cointegration tests, a growth-rate model is chosen, which considers all the interventions that happened during the sample period (1980-1999). It is shown that a variable seasonal pattern, which is a linear function of the nominal interest rate, increases the model ability to explain seasonal changes in the money demand. Despite the economic instability that marked Brazilian economic history during the last two decades, the model shows good fit and predictive power. Finally, it is shown that unsuccessful macroeconomic stabilization programs were marked by excessive liquidity, with money supply exceeding expected conditional money demand during intervention periods. The results suggest that to track monetary aggregates can be useful to policy makers even under a regime where interest rates are the main policy instrument.

Date: 2001-11
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.bcb.gov.br/content/publicacoes/WorkingPaperSeries/wps29.pdf (application/pdf)

Related works:
Journal Article: Canaries and vultures: A quantitative history of monetary mismanagement in Brazil (2009) Downloads
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:bcb:wpaper:29

Access Statistics for this paper

More papers in Working Papers Series from Central Bank of Brazil, Research Department
Bibliographic data for series maintained by Rodrigo Barbone Gonzalez ().

 
Page updated 2025-03-19
Handle: RePEc:bcb:wpaper:29