Nonlinearities in the Brazilian Yield Curve: before and during the global crisis

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Please cite the paper as:
&lquo;Luiz Alberto D´Ávila de Araújo and Joaquim Pinto de Andrade, (2014), Nonlinearities in the Brazilian Yield Curve: before and during the global crisis, World Economics Association (WEA) Conferences, No. 1 2014, Is a more inclusive and sustainable development possible in Brazil?, 5th May to 12th August 2014&rquo;

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Abstract

This article investigates the effect of macroeconomic conditions on the term structure represented by the spreads of 1, 5 and 10 year term bonds; the database used contains monthly data for the period August 1997 to September 2011. The results indicate the presence of strong nonlinearities that may compromise the effectiveness of monetary policy. On the other hand, the effects of key macroeconomic variables, such as interest rate, output, inflation, and exchange rates, on the spreads during normal periods are consistent with expectations of coherent monetary policies.


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