We develop and estimate a DSGE model for the Brazilian economy as part of the macroeconomic modeling framework of the Central Bank of Brazil. The model combines the building blocks of standard DSGE models (e.g., price and wage rigidities and adjustment costs) with the following features that better describe the Brazilian economy: (i) a fiscal authority pursuing an explicit target for the primary surplus; (ii) administered or regulated prices as part of the consumer price index; (iii) external finance for imports, which amplifies the effects of changes in external financial conditions on the economy; and (iv) imported goods used in the production of intermediate goods. It also includes the presence of financially constrained households. We estimate the model with Bayesian techniques, using data since 1999, when inflation targeting was implemented in Brazil. Evaluation based on impulse response functions, moment conditions, variance error decomposition, and initial forecasting exercises suggests that the model can be a useful tool for policy analysis and forecasting. visit to the Central Bank of Chile, to which we are very grateful. We are also grateful to Tomiê Sugahara and José R. da Costa e Silva for their participation in early stages of the project, and Angelo Fasolo for his comments and suggestions.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.