Monetary policy, default risk and the exchange rate

Revista Brasileira de Economia

Carlos Eduardo Gonçalves²  Bernardo Guimarães¹ 

[1] ,Universidade de São Paulo Department of Economics

关键词: Exchange Rate;    Default;    Monetary Policy;    Identification through Heteroskedasticity;   

DOI  :  10.1590/S0034-71402011000100003

来源: SciELO

【 摘 要 】

In a country with high probability of default, higher interest rates may render the currency less attractive if sovereign default is costly. This paper develops that intuition in a simple model and estimates the effect of changes in interest rates on the exchange rate in Brazil using data from the dates surrounding the monetary policy committee meetings and the methodology of identification through heteroskedasticity. Indeed, we find that unexpected increases in interest rates tend to lead the Brazilian currency to depreciate.

【 授权许可】

CC BY   
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