Measuring monetary policy shocks and their effects in an emerging economy: the case of Brazil

Abstract We estimate novel narrative monetary policy shocks for Brazil, derived from the Central Bank’s reaction function and accounting for both constant and time-varying systematic monetary policy. We then examine the effects of these shocks on Brazilian macroeconomic variables using structural vector autoregressions with external instruments. Our results indicate a reduction in the magnitude and volatility of monetary surprises after 2004, reflecting increased predictability in the Brazilian