TITLE:
Estimating the Neutral Real Interest Rate of the Brazilian Economy in the Post-Inflation Period
AUTHORS:
Marivia de Aguiar Nunes, Augusto Mussi Alvim
KEYWORDS:
Neutral Real Interest Rate, Structural Interest Rate, Monetary Policy, Brazil
JOURNAL NAME:
Modern Economy,
Vol.14 No.3,
March
22,
2023
ABSTRACT: This paper aims to estimate the neutral real
interest rate of the Brazilian economy, a variable that, despite not being
explicitly observable, is extremely important in economic policy discussions.
In order to do so, after a brief literature
review and an exposition of the method used herein, the estimations were
performed via two different methods: the Hodrick-Prescott filter and a structural VAR model. After these estimates were
made, we combined both, resulting in
a single estimate for the Brazilian neutral rate. The strategy of combining both methods was adopted because each one has a profile and captures
different information, making them complementary, in addition to returning a
smoother estimate and reducing the uncertainty inherent to estimating a latent
variable such as neutral interest. The main results of this study revealed that
it is not possible to affirm that the neutral interest significantly reduced in
the period in which Alexandre Tombini was the head of the Central Bank,
suggesting that its management was marked by the discretionary in the conduct
of the monetary policy.