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Monetary Policy and Exchange Rate Shocks in Brazil: Sign Restrictions versus A New Hybrid Identification Approach

Brazilian Review of Econometrics

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Field Value
 
Title Monetary Policy and Exchange Rate Shocks in Brazil: Sign Restrictions versus A New Hybrid Identification Approach
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Creator Lima, Elcyon Caiado Rocha
Maka, Alexis
Alves, Paloma
 
Subject Structural VAR, Hybrid Identification, Directed Acyclic Graphs, Sign Restrictions
C32, E31, E32, F31
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Description This paper analyzes the impacts of monetary policy, exchange rate, demand, and supply exogenous disturbances on the Brazilian economy using a structural vector autoregression model identified by two alternative methodologies. The first uses sign restrictions on impulse responses based on an open-economy macroeconomic model.  The second (hybrid) is a new methodology that combines the first with restrictions on the contemporaneous causal interrelationships among variables, derived by Directed Acyclic Graphs.   A comparison of the results shows that while the effects of exchange rate shocks are nearly the same, the effects of monetary policy shocks depend on the methodology adopted. There is a strong response of the exchange rate to demand shocks and to shocks originating in the foreign exchange market. Exchange rate shocks have an important role in explaining short-run fluctuations of prices and output. We conclude that the exchange rate is an independent source of shocks and a shock absorber.
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Publisher Sociedade Brasileira de Econometria
 
Contributor —
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Date 2011-03-04
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
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Format application/pdf
 
Identifier http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/3410
10.12660/bre.v31n12011.3410
 
Source Brazilian Review of Econometrics; Vol 31, No 1 (2011); 97-136
Brazilian Review of Econometrics; Vol 31, No 1 (2011); 97-136
1980-2447
 
Language eng
 
Relation http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/view/3410/2232
http://bibliotecadigital.fgv.br/ojs/index.php/bre/article/downloadSuppFile/3410/522