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The impact of monetary policy on the yield curve in the Brazilian economy
Código: WPE – 167
Marcel Z. Aranha
Marcelo L. Moura
The main contribution of this study is to understand how episodes of restrictive monetary policy have different impacts on long-term interest rates. These impacts are decomposed into changes in real neutral interest rates, long-run expected inflation and risk premium. For a sub-sample, the latter is further decomposed into inflationary risks and other macroeconomic risks. More specifically, this study aims at analyzing periods of recent restrictive monetary policies, such as those of September 2002, June 2004 and April 2008. The results show that changes in the risk premium are the major factor driving long-run forward rates and that real neutral interest rates play a secondary role.