Identification of monetary shocks through the yield curve: Evidence for Brazil
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Abstract
This paper derives a new measure of monetary shock for Brazil based on the yield curve. First, the Diebold and Li (2006) model is estimated with nominal yields. The changes of the latent variables of this model surrounding monetary policy meetings are used to analyze the effects on the Brazilian economy. Monetary policy decisions associated with steeper yield curves lead to higher future economic activity.
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Long Paper
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