Márcio G. P. Garcia
Monetary Policy During
Brazil´s Real Plan: Estimating the Central Bank´s Reaction Function
Co-autores:
Maria José S.Salgado
Marcelo C. Medeiros
Texto
para Discussão - PUC-Rio
Set. 2001 #444
Setembro, 2001
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 -which
is chosen endogenously - 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.