Abstract
This paper aims to investigate the formation of benchmark interest rates by understanding the factors that may influence the target set by the Brazilian Monetary Council for the Selic rate. To achieve this, data from 2003 to 2024 are analyzed to estimate a Taylor rule for Brazil through an autoregressive distributed lag (ARDL) model. The results suggest that the management of Brazilian monetary policy adheres to the principles of the Taylor rule and has been influenced by structural changes. Extreme events, such as the Subprime crisis and COVID-19, may have impacted the decisions of the monetary authority, while the 2016 impeachment and different presidential administrations did not show statistically significant effects. These findings contribute to the scientific literature on interest rate formation by providing empirical evidence for Brazil and offer valuable insights for policymakers and other economic agents who consider monetary policy in their decision-making processes.
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