The Natural Rate of Interest in Brazil

This work focused on estimating the Natural Rate of Interest for Brazil, employing three different state-space modelling approaches with several combinations of input variables. Results obtained reiterate the downward trend frequently mentioned in the literature before the pandemic shock, after which the NRI started to rise once again: ranged from 1.6% to 4.5% in 2019 and between 3.6% and 5.75% in 2023. Based on the results, the monetary policy stance in Brazil is summarized into five periods: 2000-2006, predominantly contractionary - an adaptation period after the Plano Real; 1Q-2007 to 1Q-2014, a period with noticeably loose monetary policy; 2Q-2014 to 2Q-2019, when the stance was predominantly contrationist; 3Q-2019 to 2Q-2022, when the stance went from neutral to expansionist, specially in the aftermath of the Covid-19 shock; 3Q-2022 to 4Q-2023, with a worldwide contractionary phase to cope with inflationary pressures.