Monetary Policy During Brazil's Real Plan: Estimating the Central Bank's Reaction Function

Maria José Salgado; Márcio G.P. Garcia; Marcelo C Medeiros

Monetary Policy During Brazil's Real Plan: Estimating the Central Bank's Reaction Function

Maria José Salgado, Márcio G.P. Garcia, Marcelo C Medeiros

Research output: Contribution to journal › Article › peer-review

Abstract

This paper uses a Threshold Autoregressive (TAR) model with exogenous variables to explain a change in regime in Brazilian nominal interest rates. By using an indicator of currency crises the model tries to explain the difference in the dynamics of nominal interest rates during and out of a currency crises. The paper then compares the performance of the nonlinear model to a modified Taylor Rule adjusted to Brazilian interest rates, and shows that the former performs considerably better than the latter.

Original language	English (US)
Pages (from-to)	61-79
Journal	Revista Brasileira de Economia
Volume	59
Issue number	1
State	Published - 2005
Externally published	Yes

Keywords

time series
Taylor rule
reaction function
nonlinearity
threshold models
interest rates

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title = "Monetary Policy During Brazil's Real Plan: Estimating the Central Bank's Reaction Function",

abstract = "This paper uses a Threshold Autoregressive (TAR) model with exogenous variables to explain a change in regime in Brazilian nominal interest rates. By using an indicator of currency crises the model tries to explain the difference in the dynamics of nominal interest rates during and out of a currency crises. The paper then compares the performance of the nonlinear model to a modified Taylor Rule adjusted to Brazilian interest rates, and shows that the former performs considerably better than the latter. ",

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year = "2005",

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AU - Garcia, Márcio G.P.

AU - Medeiros, Marcelo C

PY - 2005

Y1 - 2005

N2 - This paper uses a Threshold Autoregressive (TAR) model with exogenous variables to explain a change in regime in Brazilian nominal interest rates. By using an indicator of currency crises the model tries to explain the difference in the dynamics of nominal interest rates during and out of a currency crises. The paper then compares the performance of the nonlinear model to a modified Taylor Rule adjusted to Brazilian interest rates, and shows that the former performs considerably better than the latter.

AB - This paper uses a Threshold Autoregressive (TAR) model with exogenous variables to explain a change in regime in Brazilian nominal interest rates. By using an indicator of currency crises the model tries to explain the difference in the dynamics of nominal interest rates during and out of a currency crises. The paper then compares the performance of the nonlinear model to a modified Taylor Rule adjusted to Brazilian interest rates, and shows that the former performs considerably better than the latter.

KW - time series

KW - Taylor rule

KW - reaction function

KW - nonlinearity

KW - threshold models

KW - interest rates

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JO - Revista Brasileira de Economia

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Monetary Policy During Brazil's Real Plan: Estimating the Central Bank's Reaction Function

Abstract

Keywords

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