The natural rate of interest in Brazil between 1999 and 2005

Neto, Paulo Chananeco F. de Barcellos; Portugal, Marcelo Savino

doi:10.1590/s0034-71402009000200003

Cited by 7 publications

(4 citation statements)

References 23 publications

(21 reference statements)

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“…Barcellos Neto and Portugal (2009) estimated the neutral interest rate for Brazil by applying statistical filters on the series of ex-ante and ex-postreal interest rates and estimating a dynamic Taylor Rule (i.e. a dynamic reaction function).…”

Section: Review Of Literaturementioning

confidence: 99%

“…from 2005 onwards given the lack of estimates for the neutral rate from this point in time on), it was found that the neutral interest rate has been on a downward trajectory since 2006. An evaluation was also carried out on the conduct of the CB's monetary policy in recent years and, in general, the analysis showed that between the end of 2001 and 2005, the institution adopted a more conservative stance (as opposed to the result found by Barcellos Neto & Portugal, 2009) and that from then on it was closer to neutrality. Gotlieb (2013), also following Laubach and Williams (2003) and assuming a closed economy, verified a downward trend in the neutral interest rate until 2012, a dynamic particularly attributed to structural factors.…”

Section: Review Of Literaturementioning

confidence: 99%

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Estimating the Neutral Real Interest Rate of the Brazilian Economy in the Post-Inflation Period

Nunes¹,

Alvim²

2023

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This paper aims to estimate the neutral real interest rate of the Brazilian economy, a variable that, despite not being explicitly observable, is extremely important in economic policy discussions. In order to do so, after a brief literature review and an exposition of the method used herein, the estimations were performed via two different methods: the Hodrick-Prescott filter and a structural VAR model. After these estimates were made, we combined both, resulting in a single estimate for the Brazilian neutral rate. The strategy of combining both methods was adopted because each one has a profile and captures different information, making them complementary, in addition to returning a smoother estimate and reducing the uncertainty inherent to estimating a latent variable such as neutral interest. The main results of this study revealed that it is not possible to affirm that the neutral interest significantly reduced in the period in which Alexandre Tombini was the head of the Central Bank, suggesting that its management was marked by the discretionary in the conduct of the monetary policy.

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Section: Review Of Literaturementioning

confidence: 99%

Section: Review Of Literaturementioning

confidence: 99%

Estimating the Neutral Real Interest Rate of the Brazilian Economy in the Post-Inflation Period

Nunes¹,

Alvim²

2023

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“…With the number of EMDEs embracing inflation targeting rising-which meant that EMDEs were using interest rates to guide inflation to a predetermined target-and the popularity of estimates of the neutral interest rate such as Laubach and Williams (2003), researchers started estimating neutrals for these EMDEs. These include estimates for large EMDEs such as Brazil (de Barcellos Neto and Portugal, 2009;Duarte, 2010;Perrelli and Roache, 2014a), India (Behera et al, 2017), Mexico (Carrillo et al, 2017), and Turkey (Ögünç, 2006;Ögünç and Batmaz, 2011;Çatik and Akdeniz, 2019) and smaller ones such as Peru (Humala and Briones, 2011). Other EMDEs that have neutral estimates include Chile (Fuentes et al, 2007), Colombia (González et al, 2013), Philippines (Austria, 2018), South Africa (Kuhn et al, 2019), Thailand and Indonesia (Zhu, 2016), Kyrgyz Republic (Teodoru et al, 2020), Hungary, Poland, and Russia (Grafe et al, 2018).…”

Section: Neutral Real Interest Rate Estimates In Emdesmentioning

confidence: 99%

Neutral Real Interest Rates in Inflation Targeting Emerging and Developing Economies

Ruch¹

2021

Policy Research Working Papers

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The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

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“… See Arida, Bacha, and Lara-Resende (2005);Barcelos-Neto and Portugal (2006); Fraga (2005);Gonçalves, Holland, and Spacov (2007);Miranda and Muinhos (2003);Muinhos and Nakane (2006); andSalles (2007).…”

mentioning

confidence: 99%

Is Brazil Different? Risk, Dollarization, and Interest Rates in Emerging Markets

Holland

Bacha²,

Gonçalves³

2007

IMF Working Papers

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This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. We investigate the role of financial dollarization in the determination of real interest rates in emerging economies. In a simple analytical model, we show that a strategy of "dedollarizing" the economy, if it fails to address fundamental macroeconomic risks, leads to higher domestic real interest rates. We confirm this prediction in an empirical model, but find that the effect is small after controlling for the risks of dilution and default. Brazil provides a natural case study given its low degree of financial dollarization and very high real interest rates. The estimated model is unable to explain the high interest rate levels in the aftermath of Brazil's 1994 inflation stabilization. However, since the adoption in 1999 of inflation targeting and floating exchange rates, Brazil's real interest rates are gradually converging to the model's predicted values. The estimation also shows that further drops in Brazil's real interest rates could be achieved more effectively through improvements in fundamentals that lead to investment-grade status rather than through financial dollarization.

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The natural rate of interest in Brazil between 1999 and 2005

Cited by 7 publications

References 23 publications

Estimating the Neutral Real Interest Rate of the Brazilian Economy in the Post-Inflation Period

Estimating the Neutral Real Interest Rate of the Brazilian Economy in the Post-Inflation Period

Neutral Real Interest Rates in Inflation Targeting Emerging and Developing Economies

Is Brazil Different? Risk, Dollarization, and Interest Rates in Emerging Markets

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