Title: Cyclical Fluctuations in Brazil's Real Exchange Rate; The Role of Domestic and External Factors
Abstract: This paper examines the effects of capital inflows and domestic factors on Brazil’s real exchange rate. It describes the analytical framework, and then estimates a near-VAR model linking capital flows, interest rate differentials, government spending, money-base velocity, and the temporary component of the real exchange rate (TCRER). Generalized variance decompositions indicate that world interest rate shocks largely explain medium-term fluctuations in capital flows and the TCRER. Generalized impulse response functions show that a reduction in the world interest rate (and, to a lesser extent, an increase in government spending) have significant effects on the TCRER and capital flows.
Publication Year: 1997
Publication Date: 1997-10-01
Language: en
Type: preprint
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Cited By Count: 2
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