Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/148930 
Year of Publication: 
2016
Series/Report no.: 
Working Paper No. 80/2016
Publisher: 
Hochschule für Wirtschaft und Recht Berlin, Institute for International Political Economy (IPE), Berlin
Abstract: 
This paper discusses the reasons for Brazil.s high policy real interest rates by considering two opposing views, the orthodox and heterodox approaches. While orthodox authors defend the position that bad domestic policies are the cause of the high interest rate, heterodox economists claim that the international financial system and orthodox policies influence the level of the policy rate in Brazil. The aim of this study is to assess whether the proposed arguments can be supported when comparing Brazilian real interest rates with other developing countries under the same monetary regime. The conclusion is that, although the orthodox and heterodox arguments are both intuitively plausible, when comparing stylized facts and testing the hypotheses econometrically neither is sufficient to elucidate the Brazilian case. The paper concludes by suggesting that there might be political causes of the high real interest rates in Brazil such as a politically influential rentier class.
Subjects: 
Brazil
Central Bank
interest rate
monetary policy
developing countries
JEL: 
E43
E58
Document Type: 
Working Paper

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