This is not America: The Credit Channel of Monetary Policy in Brazil

Abstract

We estimate the monetary policy pass-through to lending rates in Brazil and the United States using the same methodology and obtain very different results. In the United States, the pass-through tends to be larger than 1:1. In Brazil, we find a 1:1 pass-through only in the case of non-earmarked credit for corporations and no evidence of transmission for households and earmarked credit. Owing to lower pass-through and credit/GDP, the effect of monetary policy through the credit channel in Brazil appears to be an order of magnitude smaller than in the United States.