Renata Lemos Lima

The central objective of this study is to analyze the business cycles and the effects of monetary policy in the brazilian economy, studying the period between 2001 and 2014. Initially it analyzes the theoretical assumptions about the business cycle, the conduct of monetary policy and brazilian economic cyclical series obtained by two different filtering methods. The work employs time series analysis to evaluate the effects of monetary policy in the economy through Autoregressive Vector Models (VAR) and Structural Autoregressive Models (SVAR) methodologies. It presents also the impulse response functions and variance decomposition. The results indicate that monetary policy shocks are able to smooth out fluctuations in the real economy, as proposed by the New-Keynesian theories. However, it notes that this form of conduct has been used in an excessive way, which has pushed the price index, inducing to rising inflationary expectations and uncertainty in the economic environment. In addition, the study compares two different filtering methods to evaluate short-term series: Dias and Dias filter and the Hodrick-Prescott filter. It is noted that the series estimated by both filters shows similar behavior, as well as the results estimated by VAR, producing, however, greater significance in the estimated results from the series obtained by Dias and Dias filter, which can be explained by the fact that methodology has been established for more volatile economies, such as the Brazilian case.