Cyclical Consumption, Real Interest Rate Deviations and Output Gaps in a Large Emerging Economy: Expected and Unexpected Responses under Different Regimes
Ricardo Ramalhete Moreira
Abstract:This article proposed and tested the hypothesis that both expected and unanticipated responses of cyclical consumption to changes in real interest rate (and income) are marked by non-linearities and asymmetries, depending on the regime concerning the underlying real consumption time trend. The reference model is in line with the micro-founded optimizing behavior of consumers, and different inference methods were employed to test our hypothesis for the case of a large emerging economy, like the Brazilian one, o… Show more
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