Business cycles, stock market and monetary policy in Brazil
Published:
Jan 27, 2025
Volume:
23
Keywords:
Business cycle
Stock market
Wavelet
Monetary policy
Abstract
This study analyzes the relationship between stock market and business cycles in Brazil from 1996 to 2023, using the wavelet method to assess comovements and lead-lag dynamics between these cycles, also considering the impact of monetary policy. The analysis reveals that the stock market cycle tends to anticipate the business cycle during financial crises, while the business cycle shows leadership in crises caused by non-economic factors, such as the Covid-19 pandemic. By controlling for the effect of the interest rate, a positive comovement is observed alongside a reduction in the stock market’s predictive power. These results contribute to understanding the dynamics between economic cycles, aiding investors and policymakers in predicting and mitigating the impacts of economic crises.
How to cite
Pedro Prudente de Alcântara e Silva, Joilson Giorno. Business cycles, stock market and monetary policy in Brazil. Brazilian Review of Finance, v. 23, n. 1, 2025. p. e202501. DOI: 10.12660/rbfin.v23n1.2025.92566.
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