Elohá Cabreira Brito

This paper examines the interrelations between monetary and fiscal policies and their consequences for the Brazilian economy in the period 1999-2011. Therefore, raises three hypotheses: i) the need for inclusion of public debt in the reaction function of the Central Bank, ii) the existence of a reverse wealth effect and iii) the loss of effectiveness of monetary policy caused by low duration debt which prevents a more pronounced decrease in interest rates. After a theoretical analysis of the transmission mechanisms of monetary policy and the interrelations between fiscal and monetary policies, a discussion of the origins and anomalies of the institutional structure of the Brazilian public debt, these hypotheses were investigated empirically using time series analysis time. The paper concludes that the current structure of public debt, with the Selic indexed bonds binding the measures adopted within the framework of monetary policy to fiscal policy, plastering the implementation of the second. Furthermore, it highlights the existence of a possible problem in the transmission mechanism of monetary policy today, given the low sensitivity of inflation to move in the Selic rate, resulting in a more contractionary monetary policy and low and volatile growth.