The Monetary Policy Of The Central Bank Of Brazil

The monetary policy of the Central Bank of Brazil

The main objective of this article is to provide a better understanding regarding the effectiveness of monetary policy in the case of "Indexed Bonds". The "Indexed Bonds" are bonds that try to protect the investor from some loss in the purchasing power caused by inflation. In 1994 the “Brazil’s Real Plan” was implemented in a period where inflation was “stable”. The monetary policy of the Central Bank of Brazil has been a very "tight" and unstable, including interests have been increasing in such a way that it has caused an adverse impact on the economy. Some economists establish that those responsible for this debacle are the administrators of Brazil’s public debt whose weakness is as a result of poor monetary policy. They indicate that the SELLIC interest model does not allow the wealth effect (‘Wealth Effect Channel -Mid how the variations of monetary induced assets affect consumption) operate completely. This means that the "Wealth Effect Channel" measures what people consume or do not consume due to the high interest established by monetary policy. This effect is directly related to the variation in the richness induced by the monetary policy that affects the plea pleasure. Aggregate demand is the total of goods and services that a country needs to a certain level of price over a period of time. Brazil seems to be a rich laboratory because public debt management leads to a growing indexing of the short -term interest rate bonds.

The results will indicate whether the "Indexed Bonds" at the interest rate of SELLIC weakened the effectiveness of politics in Brazil.

Indexed bonds are fixed income titles referenced to an index. In this way, the bonus yield is linked to the evolution of a certain macroeconomic magnitude. This type of bond is issued by public administrations to cover situations of irrigation derived from economic instability. When public debt management treats indexed bonds to the interest rate established by monetary policy, there is no wealth effect and as a consequence of this, monetary policy has a weak transmission channel that reduces its effectiveness. In this way this would help explain why monetary policy in Brazil has been so strict and its high interest rates.  

It also talks about the Royal Plan of Brazil for 1994 it was an economic stabilization plan designed by the Itamar Franco government and developed by the Economics team of the Ministry of Finance. The main author of this plan was the economist Edmar Bacha.  Its objective was to control hyper-inflation, a chronic Brazilian problem.  Brazil is the ninth world economy. After having experienced a period of growth for the year 2011. I enter recession as of 2015.  Brazil crosses an unprecedented economy crisis due to private consumption and fall in investments.  

Managing public debt is a primary aspect of fiscal policy. High indebtedness during the past decades had strong repercussions on the sustainability of fiscal accounts and the stability of the economy of many countries in that region. The author also tells us about the structural var and economic evidence. Econometric processes, in addition to taking into account the variance of the series of data they examine, also consider the possible difficulties associated with treating the conditioning variables as exogenous. The results show so much, in the long -term equations and in the short -term models, the positive impact of the variables, public investment, financial credit and the negative effect of change.

conclusion

Once the different stages of the economy in Brazil are exposed, both in Bonanza and in recession, we have understood that the changes exposed in this economy are the product of government decisions made by experts but in a hurry.  It is extremely interesting that an economy that was growing and that at one point was the ninth economy of the world a 4 -year -old decreased to that magnitude.  It is a reality very similar to what we are going through in our country. Rapid comparison with both countries, they are tourism paradises with a very favorable international exhibition to the economy. But in equal similarity both countries have lacked wise fiscal decisions. At this time, Brazil’s priority is to manage public debt. The History Vector (VAR) is a model of simultaneous equations formed by a reduced system of equations without restricting. On the contrary, the set of explanatory variables of each equation is constituted by a block of delays of each of the model variables. Some deterministic variables of nature, such as the economy for example as a possible temporal tendency, seasonal variables, or an impulse variable. It is for this reason that the VAR is used as a tool in use to be able to work with the financial economy of Brazil. The latter used as a measurement focus to show the exposed topic. With this brief conclusion we can understand that there are models such as VAR to foresee the economic balance of a country.