Article (Journal/Review)
Introduction to the special issue on DSGE models for the Brazilian economy
Fecha
2015-03-03Registro en:
1980-2447
10.12660/bre.v35n22015.61662
61662
Autor
Carmargo, Braz
Guimaraes, Bernardo
Institución
Resumen
Dynamic Stochastic General Equilibrium (DSGE) models have become thestandard framework for quantitative macroeconomic analysis in the world. Naturally,there is now a growing literature on DSGE models designed to study theBrazilian economy. A conference organized by the Centro Macro Brasil of theSao Paulo School of Economics – FGV, sponsored by the Instituto de PesquisaEconˆomica Aplicada (IPEA), on August 22, 2014 featured papers using DSGEmodels applied to Brazil. This special issue of the Brazilian Review of Econometricscontains five papers presented in the conference.The Brazilian Central Bank (Banco Central do Brasil) has its own DSGEmodel, the so-called SAMBA. The paper that presents and analyses the model,by Marcos de Castro, Solange Gouvea, Andr´e Minella, Rafael Santos and NelsonSouza-Sobrinho, leads this special issue. SAMBA is a large scale DSGE modelwith a few features designed to bring it closer to the Brazilian economy, namely,the presence of administered prices, an explicit target for the primary surplus,a fraction of households with no access to financial markets, external finance ofimports, and imports used as inputs in the production function. SAMBA can beused as a tool for forecasting and for assessing the impact of different shocks.The second paper in this volume, by Fabio Kanczuk, shares the same objectivesbut employs a medium scale DSGE model of a small open economy. The model isthen estimated to understand which shocks can explain the observed fluctuationsin output in the last 15 years. The model is also used to assess the economicimpacts of a hypothetical currency depreciation and to check the hypothesis thatmonetary policy has become more powerful over time in Brazil.The next paper in this volume, by Marco Cavalcanti and Luciano Vereda,builds a DSGE framework with a rich modeling of the public sector that explicitlyconsiders public employment as well as other types of public expenditures, publicinvestments and transfers. The model also incorporates a fairly detailed fiscal apparatuscomprising several policy instruments both on the taxation and spendingsides, and considers different fiscal rules. The model is thus able to quantify themacroeconomic effects of shocks to different types of fiscal policy in the short andmedium run.The fourth paper in this volume, by Vladimir Teles, Celso Costa J´unior andRafael Rosa, presents a DSGE model with two sectors that incorporates technical progress in the investment goods sector. This is motivated by evidence of theimportance of this channel that they also document in the paper. They showthat incorporating productivity shocks specific to the investment goods sector inthe model affects the results in important ways. In particular, optimal monetarypolicy is more rigorous than in standard models.Most DSGE models applied to the Brazilian economy do not use data from theperiods preceding the adoption of the inflation targeting regime in 1999. In thelast paper of this volume, Carlos Carvalho and Andr´e Vilela build a DSGE modelto investigate the transition between the different exchange rate (and monetarypolicy) regimes that took place in 1999. Their results support the transition tothe inflation targeting regime in 1999, but suggest that an earlier transition in thefirst half of 1998 might have been even better.The papers in this special issue highlight the main advantages of the use ofDSGE models for quantitative macroeconomic analysis. As put by Kanczuk, aDSGE model “forces one to think in terms of exogenous shocks and endogenousresponses, and thus to ask sensible questions”. Castro et al. add that DSGEmodels “can be successfully used as a story-telling device in the policymakingprocess.” We hope that by bringing together a number of papers applying theDSGE methodology to study the Brazilian macro economy, this volume servesboth as a useful guide to and as an inspiration for researchers interested in workingin this area.