Transmission Channels and Macroeconomic Trade-Offs in Brazilian Monetary Policy: A TVP-SVAR-SV Analysis of the Exchange Rate and Commodity Price Effects
Authors
Berggren, Alexander ; Madsen, Isabella
Term
4. term
Education
Publication year
2025
Abstract
This thesis examines how transmission channels—specifically the exchange rate channel and the global commodity price channel—shape the effectiveness of monetary policy in Brazil, with a focus on the trade-off between stabilizing inflation and the output costs of disinflation. To account for structural changes and evolving volatility, the study employs a Time-Varying Parameter Structural Vector Autoregressive model with Stochastic Volatility (TVP-SVAR-SV) to estimate the dynamic effects of monetary policy shocks from 2000 to 2024. The results indicate that Brazil’s monetary policy transmission has strengthened over time, reflected in declining sacrifice ratios across the 21st century, while the exchange rate channel has often acted as a destabilizing force by amplifying inflationary pressures and raising the output cost of disinflation. In contrast, the commodity price channel exerts a more ambiguous influence that can complicate policy implementation. These findings highlight the importance of institutional credibility, external stability, and coordinated policy responses in cushioning external shocks and enhancing the overall effectiveness of monetary policy in Brazil.
Denne afhandling undersøger, hvordan transmissionskanaler—specifikt valutakurskanalen og kanalen for globale råvarepriser—påvirker effektiviteten af pengepolitikken i Brasilien, særligt afvejningen mellem inflationsstabilisering og aktivitetsomkostninger. For at tage højde for strukturelle ændringer og skiftende volatilitet anvendes en Time-Varying Parameter Structural Vector Autoregressive-model med stokastisk volatilitet (TVP-SVAR-SV) til at estimere de dynamiske effekter af pengepolitiske stød i perioden 2000–2024. Resultaterne peger på, at den brasilianske pengepolitiske transmission er blevet stærkere over tid, hvilket afspejles i faldende sacrifice ratios gennem det 21. århundrede, men at valutakurskanalen ofte har virket destabiliserende ved at forstærke inflationspres og øge outputomkostningen ved disinflation. Råvareprisernes indflydelse fremstår mere tvetydig og kan til tider komplicere politikudførelsen. Fundene understreger betydningen af institutionel troværdighed, ekstern stabilitet og koordinerede politiske tiltag for at dæmpe eksterne stød og styrke den overordnede effektivitet af pengepolitikken i Brasilien.
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