Interest rate and monetary transmition mechanisms in Brazil.

Vol. 35 No. 1 (2015)

Jan-Mar / 2015
Published January 1, 2015
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

de Menezes Barboza, Ricardo. 2015. “Interest Rate and Monetary Transmition Mechanisms in Brazil.”. Brazilian Journal of Political Economy 35 (1):133-55.

Interest rate and monetary transmition mechanisms in Brazil.

Ricardo de Menezes Barboza
Economista do BNDES, mestre em Economia pelo IE-UFRJ e mestrando em Macroeconomia pela PUC-Rio.
Brazilian Journal of Political Economy, Vol. 35 No. 1 (2015), Jan-Mar / 2015, Pages 133-155


This paper develops the hypothesis that the Brazilian interest rate is high as a result of partially obstructed monetary transmission mechanisms. Transmission failures arise due to the following characteristics of the Brazilian economy: (i) segmentation of the credit market; (ii) low penetration of free credit within the income determination process; (iii) truncated term structure of interest rates; (iv) participation of LFT’s in public debt; (v) participation of administered prices in the consumer price index. To achieve this result, the paper explores the BMW model and provides some preliminary evidence.

JEL Classification: E40; E43; E52.

Keywords: monetary transmission mechanism interest rate monetary policy