This paper examines whether monetary policy has similar effects across Brazilian States. Our impulse response functions from state-level estimated structural vector autoregression (SVAR) reveal asymmetries in output responses to a monetary policy shock. We further investigate the reasons for the measured cross-state differential policy responses. The evidence suggests that the size of a state's response is related to economy's industry-mix variables, to the openness degree and to the state's credit volume providing evidence of an interest rate and credit-channels for monetary policy. The results also present some support to for demographic and labor markets channels theories. The results offer some words of caution for the monetary policy management in Brazil. Policy actions that fail to acknowledge the state-level socio-economic diversity may yield undesirable results and may increase regional disparities within the country.
