Real interest rules: an empirical analysis for Brazil

Authors

DOI:

https://doi.org/10.1590/1980-53575633tsgm

Keywords:

Monetary policy, Taylor rule, Real rate rules

Abstract

Modern monetary policy is conducted almost universally through the control of the short-term nominal interest rate. Since the 1990s, the Taylor rule has become the dominant representation of this approach. However, this rule exhibits limitations in economies characterized by market frictions, non-Ricardian agents, and high government spending. Recent advances in the literature suggest that rules based on the real interest rate may be more robust under such conditions. The analysis of Brazilian economic data from 2006 to 2024 provides weak evidence that monetary policy can be described by a real interest rate rule. However, between 2017 and 2024, a period of greater stability and predictability in the reaction function of the Central Bank of Brazil, the estimation of the model becomes statistically significant, suggesting that the proposed rule of the real interest rate is capable of describing the behavior of the Brazilian monetary policy.

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Published

29-09-2026

Issue

Vol. 56 No. 3 (2026): Nº Especial em homenagem ao Bruno de Paula Rocha

Section

Articles

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Copyright (c) 2026 Thales Machado Caixeta Silva, Guilherme Valle Moura

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How to Cite

Silva, T. M. C., & Moura, G. V. (2026). Real interest rules: an empirical analysis for Brazil. Estudos Econômicos (São Paulo), 56(3), e53575633. https://doi.org/10.1590/1980-53575633tsgm

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