The brazilian monetary policy on 2000’s: An insight on the high interest rates

Abstract

Even after the Real Plan and the exchange rate easing after 1999, Brazilian interest rates remain among the highest in the world. Not even the adoption of the macroeconomic tripod allowed Brazilian and international interest rates to converge. Many authors impute this fact to problems in the monetary transmission mechanisms of the Brazilian economy. This work seeks to show an alternative view to this one, aiming to analyze the proportion of current currency (M1) as a share of income. Keeping this indicator low implies that the monetary authority pays high interest rates to maintain these balances in the form of remunerated reserves. This could be one of the reasons why the Brazilian Central Bank would have to pay a higher premium than others to maintain its reserves. The article proposes a statistical analysis model and applies it to Brazil with data from the 2000s onwards to make inferences about the economic policy adopted in the country. It is argued that the monetary policy mechanisms work properly in Brazil, but they seek results that it cannot obtain.