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Optimal monetary rules: the case of Brazil

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  • Charles Lima De Almeida
  • Marco AuréLIO Peres
  • Geraldo Da Silva E Souza
  • Benjamin Miranda Tabak

Abstract

Within a dynamic programming approach, an optimal rule for the central bank to attain its inflation targeting goals is derived. The short-run nominal interest rate is used as an instrument to achieve monetary objectives. The model is tested for the Brazilian economy and compared with results found for other countries. Evidence for the estimated feedback interest rule for the Central Bank suggests that the cost of reducing inflation in an open economy is lower than that of a closed economy.

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File URL: http://hdl.handle.net/10.1080/0003684032000066804
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics Letters.

Volume (Year): 10 (2003)
Issue (Month): 5 (April)
Pages: 299-302

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Handle: RePEc:taf:apeclt:v:10:y:2003:i:5:p:299-302

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References

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  1. Pedro Cavalcanti Ferreira & Osmani Teixeira de Carvalho Guillén, 2004. "Estrutura Competitiva, Produtividade Industrial e Liberalização Comercial no Brasil," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 58(4), pages 507-532, October.
  2. Pedro H. Albuquerque, 2000. "An Information Theory Approach to the Aggregation of Log-Linear Models," Working Papers Series 4, Central Bank of Brazil, Research Department.
  3. Emanuel-Werner Kohlscheen, 2000. "Estimating Exchange Market Pressure and Intervention Activity," Working Papers Series 9, Central Bank of Brazil, Research Department.
  4. Francisco Marcos Rodrigues Figueiredo, 2001. "Evaluating Core Inflation Measures for Brazil," Working Papers Series 14, Central Bank of Brazil, Research Department.
  5. Fajardo, J. & Farias, A., 2003. "Generalized Hyperbolic Distributions and Brazilian Data," Finance Lab Working Papers flwp_57, Finance Lab, Insper Instituto de Ensino e Pesquisa.
  6. Victorio Y. T. Chu & Márcio I. Nakane, 2001. "Credit Channel without the LM Curve," Working Papers Series 20, Central Bank of Brazil, Research Department.
  7. Pedro H. Albuquerque, 2001. "Os Impactos Econômicos da CPMF: Teoria e Evidência," Anais do XXIX Encontro Nacional de Economia [Proceedings of the 29th Brazilian Economics Meeting] 029, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  8. Paulo Coutinho & Benjamin Miranda Tabak, 2002. "Delegated Portfolio Management," Working Papers Series 60, Central Bank of Brazil, Research Department.
  9. Marcelo Kfoury Muinhos & Sérgio Afonso Lago Alves & Gil Riella, 2002. "Modelo Estrutural com Setor Externo: Endogenização do Prêmio de Risco e do Câmbio," Working Papers Series 42, Central Bank of Brazil, Research Department.
  10. Bonomo, M. A. & Brito, R.D., 2001. "Regras Monetárias e Dinâmica Macroeconomica no Brasil: uma abordagem de expectativas racionais," Insper Working Papers wpe_11, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.
  11. Sandro Canesso de Andrade & Benjamin Miranda Tabak, 2001. "Is it Worth Tracking Dollar/Real Implied Volatility?," Working Papers Series 15, Central Bank of Brazil, Research Department.
  12. Sergio Afonso Lago Alves, 2001. "Evaluation of the Central Bank of Brazil Structural Model's Inflation Forecasts in an Inflation Targeting Framework," Working Papers Series 16, Central Bank of Brazil, Research Department.
  13. Francisco Marcos R. Figueiredo & Roberta Blass Staub, 2001. "Algumas Considerações Sobre a Sazonalidade no IPCA," Working Papers Series 31, Central Bank of Brazil, Research Department.
  14. Eduardo Lundberg, 2000. "Monetary Policy and Banking Supervision Functions on the Central Bank," Working Papers Series 2, Central Bank of Brazil, Research Department.
  15. Benjamin Miranda Tabak & Sandro Canesso de Andrade, 2001. "Testing the Expectations Hypothesis in the Brazilian Term Structure of Interest Rates," Working Papers Series 30, Central Bank of Brazil, Research Department.
  16. Paulo Coutinho & Benjamin Miranda Tabak, 2001. "Decentralized Portfolio Management," Working Papers Series 22, Central Bank of Brazil, Research Department.
  17. Benjamin Miranda Tabak & Eduardo José Araújo Lima, 2002. "Causality and Cointegration in Stock Markets: The Case of Latin America," Working Papers Series 56, Central Bank of Brazil, Research Department.
  18. Marcelle Chauvet, 2000. "Leading Indicators of Inflation for Brazil," Working Papers Series 7, Central Bank of Brazil, Research Department.
  19. Francisco Marcos R. Figueiredo & Thaís Porto Ferreira, 2002. "Os Preços Administrados e a Inflação no Brasil," Working Papers Series 59, Central Bank of Brazil, Research Department.
  20. Mauro Costa Miranda, 2001. "Crises Cambiais e Ataques Especulativos no Brasil," Working Papers Series 32, Central Bank of Brazil, Research Department.
  21. Benjamin Miranda Tabak & Solange Maria Guerra, 2002. "Stock Returns and Volatility," Working Papers Series 54, Central Bank of Brazil, Research Department.
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Citations

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Cited by:
  1. Aloisio Araujo & Marcia Leon, 2004. "Speculative Attacks on Debts and Optimum Currency Area: A Welfare Analysis," Working Papers Series 84, Central Bank of Brazil, Research Department.
  2. André Minella & Paulo Springer de Freitas & Ilan Goldfajn & Marcelo Kfoury Muinhos, 2003. "Inflation Targeting in Brazil: Constructing Credibility under Exchange Rate Volatility," Working Papers Series 77, Central Bank of Brazil, Research Department.
  3. Arminio Fraga & Ilan Goldfajn & Andre Minella, 2003. "Inflation Targeting in Emerging Market Economies," NBER Working Papers 10019, National Bureau of Economic Research, Inc.
  4. Benjamin Miranda Tabak, 2003. "Monetary Policy Surprises and the Brazilian Term Structure of Interest Rates," Working Papers Series 70, Central Bank of Brazil, Research Department.
  5. Benjamin Miranda Tabak, 2003. "On the Information Content of Oil Future Prices," Working Papers Series 65, Central Bank of Brazil, Research Department.
  6. Marco Matsumura & Ajax Moreira, 2011. "Assessing macro influence on Brazilian yield curve with affine models," Applied Economics, Taylor & Francis Journals, vol. 43(15), pages 1847-1863.
  7. André Soares Loureiro & Fernando de Holanda Barbosa, 2004. "Risk Premia for Emerging Markets Bonds: Evidence from Brazilian Government Debt, 1996-2002," Working Papers Series 85, Central Bank of Brazil, Research Department.
  8. Leonardo Soriano de Alencar & Márcio I. Nakane, 2003. "Real Balances in the Utility Function: Evidence for Brazil," Working Papers Series 68, Central Bank of Brazil, Research Department.
  9. Mirta Noemi Sataka Bugarin & Marcelo Kfoury Muinhos & Jose Ricardo da Costa e Silva & Maria da Glória D. Silva Araújo, 2005. "The Effect of Adverse Oil Price Shocks on Monetary Policy and Output Using a Dynamic Small Open Economy General Equilibrium Model With Staggered Price for Brazil," Working Papers Central Bank of Chile 348, Central Bank of Chile.
  10. Marcelo Kfoury Muinhos & Márcio I. Nakane, 2006. "Comparing equilibrium real interest rates: different approaches to measure Brazilian rates," Working Papers Series 101, Central Bank of Brazil, Research Department.

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