The Impact of Shocks on Commodity Prices on Inflation Dynamics in Brazil: Evidence for the Crb Index and Commodities Index Brazil (ic-br)

Name: Marcos Stöckl
Type: MSc dissertation
Publication date: 15/06/2015

Namesort descending Role
Ricardo Ramalhete Moreira Advisor *

Examining board:

Namesort descending Role
Ana Carolina Giuberti Internal Examiner *
André de Melo Modenesi External Examiner *
Ricardo Ramalhete Moreira Advisor *

Summary: Knowledge of the dynamics of commodity prices in international markets has gained importance in recent years, given their potential impact on inflation in Brazil and, therefore, its implications for the proper conduct of monetary policy. According to the literature, countries whose economies depend on exports of commodities, such as Brazil, have a lower pass-through of a rise in commodity prices on inflation. This lower transfer rates to occur, since the increase in the price of the commodity generates a pressure assessment of the local exchange, which consequently alleviates the effects on inflation. In this context, this paper aims to demonstrate the impacts of shocks in international commodity prices on inflation of the composition in Brazil, its relationship with the exchange rate, the implications of this relationship for the conduct of monetary policy of the Central Bank. By estimating models of Vector Auto Regression (VAR), commonly used by the Central Bank, it was estimated an econometric model for how to check the variations in the CRB index (Commodity Research Bureau), the world's leading commodities index, and IC-Br ( Commodities Brazil Index) - commodity index used by the Central Bank of Brazil, are passed on to consumer prices. The results recorded below show that the hypothesis of supply shocks, the commodity price fluctuations have great influence on the trajectory of consumer inflation in the country, while in certain periods this impact was possibly soft by currency appreciation. In addition, based on theoretical and empirical literature, through the results, will be sought to suggest a monetary policy response to these price variations compared to the responses suggested by the main authors studied. Keywords: Brazil Commodity Index; VAR; Commodity Research Bureau; inflation; IPCA; Exchange rate.

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