Monetary Sterilization Policy and Its Impact on the Real Exchange Rate (Case Study of Brazil) for the Period 2004-2021

Abstract

The research aims to study the impact of the monetary sterilization policy on changes in the real exchange rate in Brazil. The researcher started from a hypothesis that confirms that this policy supports the stability of the exchange rate by undermining its changes. The monetary sterilization index was calculated in two ways: the relative method and the reserves method, while the standard aspect was limited to the reserves method in addition to the rest of the other variables for ease of calculation and accuracy of its results. The researcher used the (ARDL) method to estimate the model, and the research covered the period (2004-2021). The researcher reached a number of results, the most important of which was that adopting the monetary sterilization policy supports the stability of the exchange rate, which strengthened the hypothesis from which the researcher started. The research reached several proposals, the most important of which are: supporting stability in the real exchange rate through the monetary sterilization policy in the Brazilian economy and exiting the crucible of selective policy and making it a preventive policy, which will contribute to supporting monetary stability in Brazil.