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The effects of Brazilian Central Bank communication on the yield curve

Published online by Cambridge University Press:  12 March 2025

Cássio R. A. Alves Open the ORCID record for Cássio R. A. Alves [Opens in a new window]  and
Márcio P. Laurini Open the ORCID record for Márcio P. Laurini [Opens in a new window]
Cássio R. A. Alves*
Affiliation:
Department of Economics, FEARP - University of Sao Paulo, Ribeirão Preto, Sao Paulo, Brazil
Márcio P. Laurini
Affiliation:
Department of Economics, FEARP - University of Sao Paulo, Ribeirão Preto, Sao Paulo, Brazil
*
Corresponding author: Cássio R. A. Alves; Email: [email protected]
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Abstract

This paper investigates the bidirectional relation between the Brazilian Central Bank communication and the yield curve. Using latent factors, observable macroeconomic variables, and observable variables representing Central Bank communication, we estimate a model that summarizes the yield curve. We find evidence of the effects of Brazilian Central Bank communication on the movements of the yield curve and the impact of the yield curve components in Brazilian Central Bank communication. In particular, Central Bank communication can shape yield curve curvature and slope. Additionally, we find a strong relation between Central Bank communication and the curvature of the yield curve. These results show that Central Bank communication impacts market players, making it a valuable instrument for monetary policy.

Keywords

Central Bank communicationYield CurveMonetary PolicyBayesian Estimation
Type
Articles
Information
Macroeconomic Dynamics , Volume 29 , 2025 , e83
Copyright
© The Author(s), 2025. Published by Cambridge University Press

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