The relationship between monetary policy shocks and the Brazilian stock market

Authors

  • Regis Augusto Ely Departamento de Economia / Universidade Federal de Pelotas (UFPel)
  • Vinícius Halmenschlager Departamento de Economia / Universidade Federal do Rio Grande (FURG)
  • Luís Antônio Winck Cechin Programa de Pós-Graduação em Organizações e Mercados (PPGOM/UFPel)
  • Rodrigo Nobre Fernandez Departamento de Economia / Universidade Federal de Pelotas (UFPel)

Abstract

This article investigates the relationship between monetary policy shocks and the Brazilian stock market. We use a structural model based on Bjornland and Leitemo (2009) where we identify monetary shocks with a combination of restrictions on short and long term, which retains the properties preconized by the economic theory. The results indicate
that IBrX falls 0.5% immediately after an unexpected monetary policy shock that increases the Selic rate by 100 basis points. On the other side, we found that a shock that increases IBrX by 1% leads to an increase in Selic of 75 basis points. This results show that: (i) economy agents adjust their portfolios from equities to fixed income after restrictive monetary shocks; (ii) stock market returns are one of the parameters that determines the monetary policy decisions in Brazil.

Author Biography

  • Regis Augusto Ely, Departamento de Economia / Universidade Federal de Pelotas (UFPel)
    Professor Adjunto no Departamento de Economia e no Mestrado em Economia Aplicada (PPGOM) da Universidade Federal de Pelotas (UFPel), bem como Doutor em Economia pela Universidade de Brasília (UnB).

Downloads

Published

2018-11-01

Issue

Vol. 18 No. 2 (2018)

Section

Artigos

License

The submission of a manuscript authorizes its publication by the Brazilian Journal of Business Economics/Revista Brasileira de Economia de Empresas and implies that it refers to original work, which is not currently submitted to any other journal. It is forbidden any reproduction, partial or total, by any other media, either press or digital, of the published papers. In this case, previous and necessary authorization must be requested. In case it is obtained, one must include a formal acknowledgement to the BJBE/RBEE, which is the first publisher of the paper. The BJBE/RBEE does not pay any copyright to the authors of published papers.

Copyright and Licensing

The copyrighter of the BJBE/RBEE is the Editora Universa of the Universidade Católica de Brasília.

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

Submitting an article authorizes its publication and implies a commitment that the same material will not be submitted to another journal.

The journal does not pay royalties to the authors of published articles.