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The Central Bank of Brazil's Time-Varying Taylor Rule

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  • Gropelli Carvalho, Filipe
  • Kfoury Muinhos, Marcelo

Abstract

We estimate the Central Bank of Brazil’s (BCB) monetary policy preferences over time by estimating a forward-looking Taylor-type rule through a state-space model with time varying parameters. We estimate two key parameters over time: the inflation parameter and the implicit inflation target. Our findings are: first, the BCB has over time taken a hawkish approach to inflation, over the 2003-2011 sample period, though since 2011 it has become more dovish. Second, BCB’s implicit inflation target was largely on target, though until 2011 were below the center of the official target but have since stayed between the center and the upper band.

Suggested Citation

  • Gropelli Carvalho, Filipe & Kfoury Muinhos, Marcelo, 2023. "The Central Bank of Brazil's Time-Varying Taylor Rule," Revista Brasileira de Economia - RBE, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil), vol. 76(4), March.
    • Handle: RePEc:fgv:epgrbe:v:76:y:2023:i:4:a:84959
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