Effects of monetary policy news on financial assets: Evidence from Brazil on a bivariate VAR-GARCH model (2006–17)

The impact of news releases related to the inflation targeting regime on financial market is analyzed by estimating a bivariate VAR GARCH-BEKK-in-mean model. We use daily data, from January 2006 May 2017, stock prices index (IBOVESPA), exchange rate (BRL/USD) and interbank deposit (DI360). developed positive negative measure based Caporale et al. (2016) (2018). Although literature subject vast, this paper fills relevant gaps in three ways. First, we investigate bidirectional relationship between monetary policy behavior asset before after 2008 crisis Brazil. Second, consider second moments variables interest, using conditional volatility as proxy for uncertainty. Third, provide time series approach effect macroeconomic returns. results indicate there are mean spread effects Brazilian index: (i) GARCH-in-mean parameter statistically significant difference DI360; (ii) external shocks statiscally expected with exception index; (iii) spillovers changes DI360.