An econometric analysis of the effects of macroeconomic variables on interest rates in Brazil

Resumen

This paper examines the importance of liquidity, credit, and Fisher effects on the interest rate in Brazil during the period 1975-1991, for five different segments of the financial market. The positive relationship between money and the interest rate prevailed in most of our results. This finding may represent a departure from both monetarism and rational expectation approaches. Price had a significant effect in the way money affected interest rate, especially under high rates of inflation. Some of our results confirmed the existence of segmentation among different segments of the financial market. Mainly the overnight market reacted differently. The implications of these results for the monetary transmission mechanism, and for the conduct of monetary policy in Brazil during the period 1975-1991, may have been substantial.