Within a dynamic programming approach we derive an optimal rule for the central bank to attain it's inflation targeting goals. 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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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number
63.
Length: Date of creation: Feb 2003 Date of revision: Publication status: Published in Applied Economic Letters, Vol. 10, (2003). Handle: RePEc:bcb:wpaper:63
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Article
Charles Lima De Almeida & Marco AuréLIO Peres & Geraldo Da Silva E Souza & Benjamin Miranda Tabak, 2003.
"Optimal monetary rules: the case of Brazil,"
Applied Economics Letters,
Taylor and Francis Journals, vol. 10(5), pages 299-302, April.
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