Monetary Transmission in an Emerging Targeter : The Case of Brazil

Author/Editor:

A. R. Pagan ; Douglas Laxton ; Luis Catão

Publication Date:

August 1, 2008

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 08/191

Subject:

English

Publication Date:

August 1, 2008

ISBN/ISSN:

9781451870497/1018-5941

Stock No:

WPIEA2008191

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

42

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