IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Inflation Targeting in Brazil, Chile, and Mexico: Performance, Credibility, and the Exchange Rate

  • Klaus Schmidt-Hebbel
  • Alejandro Werner

Inflation targeting (IT) has been adopted by a growing number of countries and Latin America has been part of this world trend. This paper reviews the recent IT experiences of Brazil, Chile, and Mexico, applying a common empirical framework to the three country cases. Inflation performance under IT and its associated output costs are reported and compared favorably to a control group of other countries. The paper analyzes ways by which IT has contributed to strengthen credibility: the effect of targets on inflation expectations and on actual inflation, the low influence of inflation shocks on core inflation, and the decline in inflation forecast errors. Do the three inflation targeters exhibit fear of floating? No, considering their relatively large exchange rate volatility and moderate international reserve holdings. No, considering strongly declining inflation-to-devaluation passthrough coefficients and little evidence for monetary policy reaction to exchange rate shocks. Yes, considering the frequency and intensity of sterilized exchange interventions in comparison to other inflation targeters that float more cleanly.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 171.

in new window

Date of creation: Aug 2002
Date of revision:
Handle: RePEc:chb:bcchwp:171
Contact details of provider: Postal: Casilla No967, Santiago
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:171. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.