Financial fragility and business cycles volatility in Brazil after the Real Plan
DOI:
https://doi.org/10.1590/0101-41615015dgcKeywords:
Business Cycles, Financial instability, FragilityAbstract
Financial frictions undermine the efficiency with which the financial system channels resources
to fund consumption expenditures and fixed capital investment. Fluctuations in the external
finance premium or changes in the risk behavior of economic agents may lead to increased
business cycles volatility. This paper investigates whether greater financial fragility increases the
short-run fluctuations in economic activity in Brazil. Using monthly data between 1996 and 2018, this article applied a dynamic factor model to derive a financial system fragility indicator
and estimated vector autoregressive models to evaluate this indicator’s performance throughout
the business cycles. The results indicate that greater financial fragility compromise the
country’s macroeconomic performance and reveal the importance of exchange-rate volatility
and price level volatility to the short-run fluctuations in economic activity in Brazil.
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Copyright (c) 2020 Diego Nunes Teixeira, Gisele Ferreira Tiryaki, Carlos Eduardo Iwai Drumond
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By submitting an article, the author authorizes its publication and attests that it has not been submitted to any other journal. The original article is considered final. Articles selected for publication are proofread for grammatical and orthographic errors. The journal does not pay rights for published articles. The Institute of Economic Research from the School of Economics, Business and Accounting of the University of São Paulo (Instituto de Pesquisas Econômicas da Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo) owns the journal's copyright.
Atualizado em 14/08/2025