This paper assesses the first three years of the inflation-targeting regime in Brazil adopted in July 1999. The inflation-targeting framework has shown to be highly important for the macroeconomic stabilization. We stress three important challenges: construction of credibility, change in relative prices, and exchange rate volatility. The estimations indicate the following results: i) the inflation targets have worked as an important coordinator of expectations; ii) the Central Bank has reacted strongly to inflation expectations; iii) there has been a reduction in the degree of persistence in inflation and in the volatility of inflation and output; iv) the exchange rate pass-through for "administered or monitored" prices is more than two times higher than for "market" prices. We also describe the methodology the Central Bank has developed to deal with inflationary shocks, which quantifies the sources of inflation, and examine some issues involved in the institutional design of inflation targeting.
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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number
53.
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Chapter
André Minella & Paulo Springer de Freitas & Ilan Goldfajn & Marcelo Kfoury Muinhos, 2003.
"Inflation targeting in Brazil: lessons and challenges,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), Monetary policy in a changing environment, volume 19, pages 106-133
Bank for International Settlements.
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References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Reinhart, Carmen & Calvo, Guillermo, 2002.
"Fear of floating,"
MPRA Paper
14000, University Library of Munich, Germany.
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Guillermo A. Calvo & Carmen M. Reinhart, 2000.
"Fear of Floating,"
NBER Working Papers
7993, National Bureau of Economic Research, Inc.
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