Monetary policy, inflation and the level of economic activity in Brazil after the Real Plan: stylized facts from SVAR models

This article uncovers some stylized facts about the short run fluctuations of the Brazilian economy after the Real Plan, giving special attention to the identification of the effects of monetary policy shocks. A distinctive feature of this article is the careful attention paid to monetary policy developments after the Real Plan when dividing our sample into two subsamples (1996:07-1998:08 and 1999:03-2004:12). We use directed acyclic graphs to identify the Structural Vector Autoregression (SVAR) models. In contrast with most SVAR analysis for Brazil, we found empirical evidence that supports the view that a contractionary monetary policy indeed reduces the price level.

Structural VAR; Monetary Policy; Directed Acyclic Graphs