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Fiscal effect from inflation targeting: the Brazilian experience

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  • Helder Ferreira de Mendonca
  • Rubens Teixeira da Silva

Abstract

This article evaluates the presence of possible unpleasant effects on the fiscal side due to a disinflation process initiated with the adoption of inflation targeting in Brazil. The analysis for this country deserves attention because, credibility is still being built and Brazil represents a potential laboratory experiment in which the effects of an adoption of inflation targeting, after more than half a decade, can be studied. Under this perspective, an empirical analysis based on OLS, GMM and VAR methods is made. The findings denote that the development of credibility is a powerful instrument for eliminating the unpleasant effects from a tight monetary policy (necessity of increasing primary surplus) on public debt.

Suggested Citation

  • Helder Ferreira de Mendonca & Rubens Teixeira da Silva, 2009. "Fiscal effect from inflation targeting: the Brazilian experience," Applied Economics, Taylor & Francis Journals, vol. 41(7), pages 885-897.
  • Handle: RePEc:taf:applec:v:41:y:2009:i:7:p:885-897
    DOI: 10.1080/00036840701721398
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    1. repec:spr:empeco:v:53:y:2017:i:4:d:10.1007_s00181-016-1177-2 is not listed on IDEAS
    2. Helder Ferreira de Mendonca, 2007. "Empirical evidence from fourteen countries with explicit inflation targeting," Applied Economics Letters, Taylor & Francis Journals, vol. 14(8), pages 573-576.
    3. Lucotte, Yannick, 2012. "Adoption of inflation targeting and tax revenue performance in emerging market economies: An empirical investigation," Economic Systems, Elsevier, vol. 36(4), pages 609-628.
    4. de Mendonça, Helder Ferreira & da Silva Veiga, Igor, 2014. "A Note On Openness And Inflation Targeting: Implications For The Unpleasant Fiscal Arithmetic," Macroeconomic Dynamics, Cambridge University Press, vol. 18(05), pages 1187-1207, July.
    5. Auel, Matias Carlos & de Mendonça, Helder Ferreira, 2011. "Macroeconomic relevance of credit channels: Evidence from an emerging economy under inflation targeting," Economic Modelling, Elsevier, vol. 28(3), pages 965-979, May.
    6. Helder de Mendonca, 2007. "Towards credibility from inflation targeting: the Brazilian experience," Applied Economics, Taylor & Francis Journals, vol. 39(20), pages 2599-2615.
    7. Helder Ferreira de Mendonça & Marcio Pereira Duarte Nunes, 2011. "Public debt and risk premium: An analysis from an emerging economy," Journal of Economic Studies, Emerald Group Publishing, vol. 38(2), pages 203-217, May.
    8. Helder Ferreira de Mendonça & Roseli da Silva, 2016. "2333-2349," Economics Bulletin, AccessEcon, vol. 32767(4), pages 2333-2349.

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