International reserves and interest rate in Brazil between 1999-2020
DOI:
https://doi.org/10.14393/REE-v38n1a2023-64806Keywords:
International reserves, Interest rate, Threshold regressionAbstract
During the 2000s, Brazilian international reserves increased significantly. The literature points out that part of this growth was excessive and costly. However, the cost of carrying the reserves decreased due to the large reduction in the interest rate. Considering the wide range of variation in the Brazilian interest rate between 1999-2020, it is possible that international reserves are non-linearly related to the interest rate. To verify this, descriptive statistics analysis, linear regression, and threshold regression models were used. The result indicated that the response of reserves to an interest rate variation is lower when the interest rate is at a historically low level than when it is at high levels.
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