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Brazil: taming inflation expectations

  • Afonso S. Bevilaqua
  • Mário Mesquita
  • André Minella

This paper analyzes monetary policy implementation and convergence of inflation and inflation expectations to the targets in Brazil after the crisis in 2002. It covers the initial disinflation and subsequent economic recovery, followed by the inflation rebound and corresponding policy response, and finally the consolidation of disinflation in 2005-06. Monetary policy implementation and the overall improvement in macroeconomic fundamentals have contributed substantially to create a more stable and predictable environment, evidenced by signs of reduction in inflation uncertainty. Furthermore, econometric exercises indicate the critical role played by the targets as attractors for inflation expectations.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps129.pdf
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Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 129.

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Date of creation: Jan 2007
Date of revision:
Handle: RePEc:bcb:wpaper:129
Contact details of provider: Web page: http://www.bcb.gov.br/?english

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  1. Söderlind, Paul, 2000. "Inflation Forecast Uncertainty," CEPR Discussion Papers 2499, C.E.P.R. Discussion Papers.
  2. Martin Cerisola & Gaston Gelos, 2009. "What drives inflation expectations in Brazil? An empirical analysis," Applied Economics, Taylor & Francis Journals, vol. 41(10), pages 1215-1227.
  3. Sergio A. L. Alves & Waldyr D. Areosa, 2005. "Targets and Inflation Dynamics," Working Papers Series 100, Central Bank of Brazil, Research Department.
  4. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters, in: Monetary Policy, pages 155-193 National Bureau of Economic Research, Inc.
  5. Afonso Bevilaqua & Rodrigo Azevedo, 2005. "Provision of FX hedge by the public sector: the Brazilian experience," BIS Papers chapters, in: Bank for International Settlements (ed.), Foreign exchange market intervention in emerging markets: motives, techniques and implications, volume 24, pages 119-26 Bank for International Settlements.
  6. 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.
  7. MINELLA André & DE FREITAS Paulo Springer & GOLDFAJN Ilan & KFOURY MUINHOS Marcelo, . "Inflation Targeting in Brazil: Constructing Credibility under Exchange Rate Volatility," EcoMod2003 330700103, EcoMod.
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