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Política monetária e taxa de câmbio em uma pequena economia aberta: uma análise empírica para o Brasil [Monetary policy and exchange rate in a small open economy: an empirical analysis for Brazil]

Author

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  • Andreza Aparecida Palma

    (UFSCar)

Abstract

The objective of this study is to verifyhow monetary policy responds to exchange rate shocks in Brazil underinflation targeting regime, by considering thetwo-way relationship between these variables (monetary policy and exchange rate).Following Bjørnland and Halvorsen (2014), we estimate a structural VAR model that is identified by a combination of sign and short-term (zero) restrictions (Cholesky-sign decomposition). The results obtained show that there is an important and significant response of monetary policy to exchange rate shocks. The response of monetary policy is immediate, which leads us to conclude that neglecting the contemporary interaction between these variables may lead to inaccurate results.Furthermore, there was no significant evidence of any puzzle in response of the exchange rate and inflation to monetary policy shocks.

Suggested Citation

  • Andreza Aparecida Palma, 2017. "Política monetária e taxa de câmbio em uma pequena economia aberta: uma análise empírica para o Brasil [Monetary policy and exchange rate in a small open economy: an empirical analysis for Brazil]," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 27(2), pages 119-155, May-Augus.
    • Handle: RePEc:nov:artigo:v:27:y:2017:i:2:p:119-155
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    More about this item

    Keywords

    Structural VAR; monetary policy; exchange rate shocks; Cholesky-sign decomposition; small open economy;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus

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