The purpose of this study is to identify the effects of monetary policy and macroeconomic shocks on the dynamics of the Brazilian term structure of interest rates. We estimate a near-VAR model under the identification scheme proposed by Christiano et al. (1996, 1999). The results resemble those of the US economy: monetary policy shocks flatten the term structure of interest rates. We find that monetary policy shocks in Brazil explain a significantly larger share of the dynamics of the term structure than in the USA. Finally, we analyze the importance of standard macroeconomic variables (e.g., GDP, inflation, and measure of country risk) to the dynamics of the term structure in Brazil.
Brazil’s economic growth has significantly increased the size of its’ middle class, also called class C. Among, the many factors that are allowing this phenomenon to happen, the Internet is relevant since it opens doors and gives new opportunities to a group that for decades have been in the outskirts of society. There is extensive literature that links the Internet to growth and development. The Solow Growth Model supports this idea since technological change spurs growth to a new steady-state, allowing higher purchase power and better living standards. Due to the nature of the model causality problems were a possibility. Hence, the current study utilized the Structural Equation Modeling (SEM) adapted from Roeller and Waverman’s study to solve for endogeneity.