All Rights Reserved
AccessEcon LLC 2006, 2008.
Powered by MinhViet JSC
ralph lauren polo

Andreza A Palma
''Natural interest rate in Brazil: further evidence from an AR-trend-bound model''
( 2016, Vol. 36 No.3 )
The main objective of this study is to estimate the natural interest rate for Brazil using a parsimonious AR-trend-bound model proposed by Chan, Koop and Potter (2013). This model considers a time varying autoregressive process for the interest rate gap (difference between real interest rate and natural interest rate) and stochastic volatility (time-variant uncertainty). The interest rate gap measures the monetary policy stance. Furthermore, the unobserved latent states are limited, which can help to reduce the uncertainty regarding the estimation of these variables. This method presents plausible results for the Brazilian case. The average natural interest rate is around 5.41% p.a. The interest rate gap is positive until mid 2009, which indicates a restrictive policy for the period. Since then, the gap has had predominantly negative values, which indicates an expansionist policy. This result is consistent with the dynamics of the Brazilian economy.
Keywords: non-linear state space model, interest rate forecasting, natural interest rate, Bayesian methods, AR-trend-bound model
JEL: C5 - Econometric Modeling: General
E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit: General
Manuscript Received : Feb 07 2016 Manuscript Accepted : Jul 08 2016

  This abstract has been downloaded 181 times                The Full PDF of this paper has been downloaded 96947 times