Note(s): The country-specific interest rate for Brazil is measured as the sum of the US real interest rate and J.P. Morgan’s EMBI + sovereign spread. US real interest rate is proxied by the three-month US Treasury Bill minus a measure of expected US inflation. We compute the expected US inflation as the average percentage increase in the US GDP deflator over the previous four quarters. US Three-month Treasury Bill and US GDP deflator are sourced from the Federal Reserve Economic Data (FRED) database. All data are seasonally adjusted using X-13 ARIMA-SEATS. Also, variables are in deviation from a log-linear and log-quadratic trend, except for the Trade Balance which is in deviation from a linear and quadratic trend. We also demean each variable separately. Standard errors in parentheses. *p < 0.1, **p < 0.05, ***p < 0.01

Source(s): Prepared by the authors