This paper attempts to extend empirical investigations about the asymmetric effects of monetary shocks in the Brazilian economy. We specify and estimate a nonlinear smooth transition vector autoregressive model including output, inflation, exchange rate and a monetary policy indicator (SELIC rate). Impulse response functions showed that expansionary and contractionary monetary shocks have asymmetric effects on output growth and inflation. Regarding to the business cycle, contractionary monetary shocks showed stronger effects in both low-growth and low-inflation states, while expansionary shocks were stronger in both higher-growth and higherinflation periods. In addition, we found that inflation and output growth are rigid to countercyclical monetary shocks.
