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Monetary Transmission in an Emerging Targeter: The Case of Brazil
Author:
A. R. Pagan null

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,
Mr. Douglas Laxton
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, and
Mr. Luis Catão
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Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 191
Language:
English
Publication Date:
01 Aug 2008
DOI:
https://doi.org/10.5089/9781451870497.001
ISBN:
9781451870497
ISSN:
1018-5941
Pages:
42
Keywords:
WP; exchange rate; monetary policy; mover accent
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper lays out a structural model that incorporates key features of monetary transmission in typical emerging-market economies, including a bank-credit channel and the role of external debt accumulation on country risk premia and exchange rate dynamics. We use an SVAR representation of the model to study the monetary transmission in Brazil. We find that interest rate changes have swifter effects on output and inflation compared to advanced economies and that exchange rate dynamics plays a key role in this connection. Importantly, the response of inflation to monetary policy shocks has grown stronger and the output-inflation tradeoff improved since the introduction of inflation targeting.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund