Supply shocks and monetary policy in the Brazilian economy: an analysis of the impact of commodity prices on infl ation between 2002 and 2014
Abstract
This study investigates how the supply shocks, originated by commodity prices, have impacted on the Brazilian infl ation, the way, and how effi ciently monetary policy of the country has reacted. To this purpose, a semi-structural model containing a Phillips curve, an IS curve, and two versions of the Central Bank’s reaction function were estimated. The method of estimation used was the autoregression with Vector Error Correction (VEC) in its structural version. The results suggest that the Brazilian infl ation rate has an important index component, but it is also affected by the expectation that the market shows about the infl ation, and by the price behavior on the supply side. They both have some impact on infl ation expectations.
Keywords: inflation, supply shocks, commodity prices, monetary policy.
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