This paper evaluated the existence of asymmetries in economic policy responses in Brazil between 2001 and 2010, checking the behavior of the components of fiscal (rule and discretion components) and monetary policies over the business cycle. To do so, it conducted a preliminary descriptive analysis and estimated Markov-switching autoregressive models (MS-VAR). The preliminary analysis showed evidence of nonlinearity, with the policies behaving differently when facing different scenarios. The MS-VAR models have confirmed this result, showing that the rule is faster and less asymmetric than the other policies. Monetary policy, in turn, reacts more strongly to positive changes ofthe gap.
