Medium-Size Macroeconomic Model for the Brazilian Economy

This paper presents a medium-scale structural model for the Brazilian economy with more than 30 equations. The potential output is derived from a Cobb-Douglas production function and the demand side is divided in estimated equation for: consumption of the families, investment in machinery and construction, government spending and net exports. The estimated Phillips curve has two interesting features: dummies for the structural break in the pass-through and also a term that includes labor productivity on the Phillips equation. An algorithm to run the model with a model consistent forward-looking term in the Phillips curve is implemented. There are long-run equilibrium conditions for the external and fiscal debts and also for the real interest rate. External and supply shocks hit the medium-size model to generate impulse responses in order to compare with small-scale structural models.