Although the role of regulatory agencies, in particular the Central Bank, is to submit the ones being regulated to the decisions, some authors argue that it is reasonable to suppose that the decisions taken by regulatory agents are in fact in the interest of the regulated. This situation is known as regulatory capture. This project assess whether this situation occurs in Brazil, in particular in the case of Central bank participation on the decisions concerning the basic interest rate. The banks, via their funds, are the largest holders of government bonds which are largely remunerated based on the basic interest rate. Thus, the project observes whether it is possible to say that the Central Bank, when deciding about the basic interest rate, favors the position of the commercial bank system. Econometric models will be developed in order to measure the level of capture based on agent-principal theories and the economic models of regulation.
From Glauco Peres da Silva and Raquel de Freitas Oliveira.