On high interest rates in Brazil

Abstract

This article examines the question of why interest rates are so high in Brazil as compared to the international average. It looks at theoretical arguments based on excessive government deficits, structural lack of private savings, inflation bias, excessive investment demand and fear of floating. An informal look at the evidence does not strongly corroborate any of these arguments. Hence a wise central bank should consider "testing" the market to make sure it is not dealing with an extreme equilibrium configuration or a long standing disequilibrium.

Bank Lending Rates and Spreads in Emdes : Evolution, Drivers, and Policies

“…Banking sector structure: The efficiency of the banking system in Brazil is relatively low due to the noncompetitive market structure. Lopes (2014) finds evidence that the structure of Brazil's banking sector plays an important role in keeping interest rates and interest rate spreads high. Over 72% of the commercial banking system's total assets belongs to the four largest banks.…”

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

“…According to mainstream economists, the CBRIR is high because there is a lack of saving in Brazil (Arida et al, 2003;Lara Resende 2011;Lopes 2014;Segura-Ubiergo 2012). This argument is based on the loanable funds theory in which the equilibrium between the supply of saving and the demand for investment in the market for loanable funds determines the equilibrium interest rate (Mishkin 2014, p.78).…”

“…Thus, the stylized facts do not support the saving gap argument. (Hausmann, 2008;Lopes, 2014;Segura-Ubiergo, 2012), lack of central bank independence (Arida et al, 2003;Favero and Giavazzi, 2002;Nahon and Meurer, 2009;Segura-Ubiergo, 2012) and high debt-to-GDP ratio (Arida et al, 2003;Favero and Giavazzi, 2002;Gonçalves et al, 2007;Muinhos and Nakane, 2006;Segura-Ubiergo, 2012). However, because of unavailability of data, these mechanisms could not be considered.…”

A Influência Da Financeirização Sobre a Taxa De Juros Real Brasileira

“…A política monetária empreendida pelo Banco Central do Brasil é motivo de forte discussão no meio acadêmico (GARCIA e DIDIER, 2003;LOPES, 2014). Em particular, o fato de o país apresentar uma das maiores taxa de juros real do mundo é investigado em vários trabalhos acadêmicos.…”