Implications of public debt indexation for monetary policy transmission

The goal of this paper is to provide a better understanding of monetary policy effectiveness in the case of indexed bonds. When public debt management deals with bonds indexed to the interest rate set by the monetary policy, there is no wealth effect and, as a consequence, monetary policy has a weak transmission channel reducing its effectiveness. This can help to explain why monetary policy in Brazil has been so tight and interest rates so high during the Real Plan.

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Year of publication:	2011
Authors:	Andrade, Joaquim Pinto de ; Pires, Manoel Carlos de Castro
Published in:	Journal of Applied Economics. - Universidad del CEMA, ISSN 1667-6726. - Vol. XIV.2011, November, 2, p. 257-268
Publisher:	Universidad del CEMA
Subject:	wealth effect \| monetary policy \| indexation \| public debt management

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Extent:	application/pdf
Type of publication:	Article
Classification:	E32 - Business Fluctuations; Cycles ; E43 - Determination of Interest Rates; Term Structure Interest Rates
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10010616596