The natural yield curve in Brazil

Adonias Evaristo Da Costa Filho
2019 Revista Brasileira de Finanças  
<p>This paper estimates the term structure of natural interest rates for Brazil, a generalization of the concept of natural rate of interest for the yield curve. First, the Diebold-Li (2006) model is estimated with real yields. The latent factors of this model are then used in a model that includes an IS and a Phillips curve. The natural yield curve is obtained as the level, slope and curvature that closes the output gap at each point in time. This decomposition allows a broader indicator of
more » ... stance of monetary policy and a real-time measure of the natural rate. The difference between the slope of the real curve and its natural counterpart is highly correlated with the output gap.</p>
doi:10.12660/rbfin.v17n4.2019.78914 fatcat:u4lgsha5uzdlndhrszz2isqo44