The Effects of Monetary Policy in Brazil: results from agnostic identification

Abstract

This article investigates the effects of monetary policy shocks in the Brazilian economy through the period July/1999 to May/2010. We follow the procedures suggested by Uhlig (2005) to verify the impact of a contractionary monetary shock on output and inflation. With 65% probability, real GDP declines immediately after the shock. This probability reaches 20% if one considers a negative variation between 0 and 0.5 percent of GDP. With 35% probability the price index (IPCA) drops 0.10 percent during the first six months after this shock.