TITLE:
Monetary Policy, Commodity Prices and Credit in Brazil: A SVAR Approach
AUTHORS:
Francisco J. S. Rocha, Marcos R. V. Magalhães, Átila A. Brilhante
KEYWORDS:
Credit Cycle in Brazil, Commodities, SVAR
JOURNAL NAME:
Theoretical Economics Letters,
Vol.12 No.2,
April
2,
2022
ABSTRACT: This study aims to analyze,
leaning on a structural autoregressive vector (SVAR), whether external variables,
such as the commodity price index and the US GDP, are relevant to consistently capture the dynamic
interaction between credit and important domestic variables in Brazil,
namely, GDP, inflation, interest rate and exchange rate. Shocks to the interest
rate happen to be important for credit dynamics. At short horizons, shocks to
credit itself play a greater role in explaining this variable. At long
horizons, shocks to commodity prices are taken to be a respectable player in
credit growth. The results also indicate that a positive shock to the interest
rate implies a reduction in Brazilian GDP, remaining
below its baseline. In turn, a positive shock to credit gives rise a small growth in Brazil’s GDP during a quarter, returning, thereafter, to its
baseline. Finally, in the long run, the
variance decomposition shows that shocks to commodity prices explain
about 67%, 47%, 43% and 15% of the forecast error related to Brazilian GDP,
credit, exchange rate and interest rate, respectively. This fact can be taken
as an important determinant toward the dynamics of domestic variables in
Brazil.