Using a structural VAR model, we estimate the historical series of the Brazilian natural rate of interest, defined as the real interest rate that, when set, keeps inflation steady. In an inflation-targeting regime, the knowledge of this variable is critical to the Central Bank in order to define the path of his monetary policy instrument. We verify that the real interest rate practiced in Brazil in the period between September 2000 until December 2003 was systematically higher and more volatile than the natural rate. Based in this last fact, we analyze the stance of monetary policy in that period.
natural rate of interest; monetary policy; structural VAR
