Global shocks and sovereign risk shocks are responsible for a large fraction of the business cycle in emerging markets. Using Brazil as reference, we verify that such influence extends to the nominal term structure of the interest rate (TIR) and two of its components: real TIR and inflation risk premium (IRP). We estimate the size and relevance of this impact using a macrofinance SVAR model that includes nominal interest rates maturing in 1, 3 and 4 years, their components, domestic macroeconomic variables, and an exogenous bloc for the world economy. An adverse global uncertainty shock results in steeper nominal and real TIR by reducing shorter maturity rates, while the IRP is less responsive. A positive shock to the US 3 years T-Bond (3yTBond) moves nominal and real TIR upwards but reduces their slopes because of a smaller rise in longer maturity rates; the IRP TIR also moves upwards but becomes steeper. An adverse sovereign risk shock impacts nominal and real TIR, and the IRP TIR similarly, moving them upwards and augment their declivity. Global uncertainty shocks explain around 22\% of the forecast error variance (FEV) for 1 year maturity real rate, but not much for longer maturities, nominal rates, and IRP. Shocks to 3yTBond explain around 25\% of the FEV of nominal rates maturing in 1 and 3 years, and real rates maturing in 3 and 4 years, and around 30\% of IRP at these maturities. Sovereign risk shocks contribute with about 18\% of FEV of 3 and 4 years nominal and real rates, and similar magnitude for 4 years IRP.
Comissão Organizadora
Anderson Odias da Silva
Claudia Yoshinaga
Ricardo D. Brito
Felipe Saraiva Iachan
Vinicius Augusto Brunassi Silva
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