Did Directed Credit Impact the Effectiveness of Brazilian Monetary Policy in the Post Inflation-Target Period?

Abstract

This essay aims to assess whether the effectiveness of monetary policy diminished after 2008 with the increase in the share of directed credit in the total credit in the Brazilian economy. For this reason, the monetary policy was only able to act on part of the credit existing in the economy. The main findings reveal that, up to September 2008, the pattern of interest rates influenced the directed credit, which corroborates with the research hypothesis. On the other hand, as of October 2008, it was found that only free credit was influenced by monetary policy and that the pattern of directed credit negatively affected the perception of risk in the Brazilian economy in the initial periods and over longer horizons. This suggests the policy of increasing the share of directed credit constitutes a strategy that does not contribute to the positive evolution of Brazil.