Open AccessMonetary Policy and Long-Term Real Interest Rates in Brazil
Author(s) -
Adonias Evaristo da Costa Filho
Publication year - 2018
Publication title -
revista brasileira de finanças
Language(s) - English
Resource type - Journals
eISSN - 1984-5146
pISSN - 1679-0731
DOI - 10.12660/rbfin.v16n3.2018.73938
Subject(s) - monetary policy , economics , term (time) , basis point , interest rate , monetary economics , credit channel , real interest rate , real economy , macroeconomics , econometrics , inflation targeting , physics , quantum mechanics
This paper studies the sensitivity of long-term real rates to monetarypolicy in Brazil. Based on the response of long-term real rates to monetarypolicy decisions, it is found that monetary factors have little power overlong-term rates, with 100 basis points unexpected hike in the policy rateleading to an increase in long-term real rates of 12 basis points. Theresults are consistent with the classical view of interest rates, in whichthe real rate of the economy in the long run is determined by realfundamentals and largely unrelated to monetary factors.