Inferring Structural Beliefs from Macroeconomic Expectations: Evidence from Brazil

I analyze multi-horizon market forecasts for macroeconomic variables in Brazil from 2010 to 2026, using a structural macroeconomic model to interpret stated beliefs as the outcomes of a coherent belief system. This produces time-varying beliefs about policy rules, transmission mechanisms, and structural shocks. Beliefs about the monetary policy rule vary in two distinct dimensions, with the perceived target and Taylor response coefficients showing independent variation. Monetary transmission is seen as weak; the perceived Philips and IS curves are very flat. Markets see fiscal policy as increasingly unresponsive to higher debt. The perceived inflation target is unchanged after an unexpected monetary tightening, but the perceived response to inflation increases, with larger effects for monetary surprises and smaller for news shocks.