Evidences of incomplete interest rate pass-through, directed credit and the cost channel of monetary policy in Brazil
DOI:
https://doi.org/10.1590/0101-41614841injKeywords:
Monetary Policy, Cost Channel, Interest Rate Pass-Through, Directed CreditAbstract
The aim of this study is to analyze the relevance of the cost channel of monetary policy in Brazil, the possibility of a limited interest rate pass-through, and the relation among directed credit and monetary policy. For that, we use a New-Keynesian DSGE model in which: the costs of firms are directly influenced by the level of the banks’ loan rate; part of banks are not able to adjust their loan rates each period; part of banks concede directed credit. We apply the minimum distance approach (Matching) as the estimation method. The results indicate that: the cost channel plays a decisive role in the monetary policy transmission, explaining the monetary policy price-puzzle; there is no evidence of incomplete interest rate pass-through; the directed credit reduces the monetary policy capacity to modify credit conditions.
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