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Revista Brasileira de Economia

Print version ISSN 0034-7140


GUIMARAES, Rafael Rockenbach da Silva  and  MONTEIRO, Sérgio Marley Modesto. Monetary policy and regional output in Brazil. Rev. Bras. Econ. [online]. 2014, vol.68, n.1, pp.73-101. ISSN 0034-7140.

This work presents an analysis of whether the effects of the Brazilian monetary policy on regional outputs are symmetric. The strategy developed combines the techniques of principal component analysis (PCA) to decompose the variables that measure regional economic activity into common and region-specific components and vector autoregressions (VAR) to observe the behavior of these variables in response to monetary policy shocks. The common component responds to monetary policy as expected. Additionally, the idiosyncratic components of the regions showed no impact of monetary policy. The main finding of this paper is that the monetary policy responses on regional output are symmetrical when the regional output decomposition is performed, and the responses are asymmetrical when this decomposition is not performed. Therefore, performing the regional output decomposition corroborates the economic intuition that monetary policy has no impact on region-specific issues. Once monetary policy affects the common component of the regional economic activity and does not impact its idiosyncratic components, it can be considered symmetrical.

Keywords : Monetary policy; Economic development; Regional economy.

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