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Inflation target, interests and prices Brazilian retail industry

Author

Listed:
  • Fernando Nogueira da Costa
  • Simone Silva de Deos
  • José Valney de Brito

Abstract

In this paper we analyze inflation targeting, focusing on the interest – price transmission mechanism. Its theoretical foundations are analized based on conventional and alternative literature. We discuss the recent performance of the retail industry in Brazil, highlighting how monetary policy affects prices, both directly and indirectly. We conclude evaluating inflation targeting in a critical way. Our key hypothesis is that interest rates must be seen not only as an instrument to control the general price level and the level of activity, by indirectly regulating aggregate demand. It must also be seen as a fundamental and direct component of the prices formed in the Brazilian retail industry. The big risk of inflation targeting, on the one side, is to increase deflation and, on the other, to create stagflation – unemployment and inflation. JEL Classification: E31; E52; L81.

Suggested Citation

  • Fernando Nogueira da Costa & Simone Silva de Deos & José Valney de Brito, 2001. "Inflation target, interests and prices Brazilian retail industry," Brazilian Journal of Political Economy, Center of Political Economy, vol. 21(4), pages 705-724.
    • Handle: RePEc:ekm:repojs:v:21:y:2001:i:4:p:705-724:id:997
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    More about this item

    Keywords

    Inflation target; exchange rate regime; transmission channels; retail;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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