Monetary Policy Transmission to Lending Rates: Evidence from Brazil
IMF Working Papers, July 25, 2025
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- Monetary Policy Transmission to Lending Rates: Evidence from Brazil
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Bibliographic details
- Authors: Daniel Leigh, Rui Xu
- Published: July 25, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229019002.001
Summary and purpose
- Estimates the strength of monetary policy transmission to bank lending rates in Brazil.
- Identifies monetary policy shocks using forecast errors from Brazil’s daily Focus survey of professional forecasters.
- Uses an instrumental variable application of local projections to estimate pass-through to lending rates.
Main empirical findings
- Aggregate pass-through of 70 percent after four months.
- Full passthrough to market-based lending rates and 20 percent to government-directed credit interest rates.
- Bank-level heterogeneity:
- 40 percent pass-through for payroll-backed loans.
- 80 percent pass-through for working capital loans.
- Stronger pass-through for larger banks.
- Time variation:
- Estimated pass-through has increased since 2020 due to more responsive corporate loans.
Methodology (concise)
- Identification of monetary policy shocks: forecast errors from Brazil’s daily Focus survey of professional forecasters.
- Estimation approach: instrumental variable application of local projections to measure dynamic pass-through to lending rates.
Publication and metadata
- Authors: Daniel Leigh, Rui Xu
- Date: July 25, 2025
- Pages: 22
- Volume: 2025
- Issue: 152
- Series: Working Paper No. 2025/152
- DOI: https://doi.org/10.5089/9798229019002.001
- Stock No: WPIEA2025152
- ISBN: 9798229019002
- ISSN: 1018-5941
Source: IMF Working Papers — "Monetary Policy Transmission to Lending Rates: Evidence from Brazil" by Daniel Leigh and Rui Xu (July 25, 2025).
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- Working Paper