Implementing Inflation Targeting in Brazil

Banco Central do Brasil Working Paper No. 1

29 Pages Posted: 12 Dec 2000

See all articles by Joel Bogdanski

Joel Bogdanski

Government of the Federative Republic of Brazil - Studies and Research Department

Alexandre A. Tombini

Government of the Federative Republic of Brazil - Studies and Research Department

Sergio R. da C. Werlang

Government of the Federative Republic of Brazil - Studies and Research Department

Date Written: July 2000

Abstract

Brazil has put in place an inflation-targeting framework for monetary policy in mid-1999, less than six months after moving to a floating exchange rate system. This paper presents the macroeconomic background that has led to the shift in monetary policy regime, and describes the general institutional arrangements and operational framework that has been adopted. The paper also discusses the basic modeling approach that has aided the decision-making process in the initial phase of inflation targeting in Brazil. We describe the family of small-scale macroeconomic models that has been used for informing and disciplining discussions about monetary policy within the Central Bank. These models contain few equations and few variables, but carry a considerable theoretical content and provide a stylized representation of the monetary policy transmission mechanism. They are easily understood, and especially suitable for simulation of a wide range of issues. We conclude with the main lessons that may be drawn from the initial Brazilian experience with inflation targeting.

JEL Classification: E52, E58

Suggested Citation

Bogdanski, Joel and Tombini, Alexandre A. and da C. Werlang, Sergio R., Implementing Inflation Targeting in Brazil (July 2000). Banco Central do Brasil Working Paper No. 1, Available at SSRN: https://ssrn.com/abstract=247507 or http://dx.doi.org/10.2139/ssrn.247507

Joel Bogdanski (Contact Author)

Government of the Federative Republic of Brazil - Studies and Research Department ( email )

SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, Distr. Federal 70.000-000 DF 70074
Brazil
+61-4141243 (Phone)
+61-2260767 (Fax)

Alexandre A. Tombini

Government of the Federative Republic of Brazil - Studies and Research Department

SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, Distr. Federal 70.000-000 DF 70074
Brazil

Sergio R. Da C. Werlang

Government of the Federative Republic of Brazil - Studies and Research Department ( email )

SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia, Distr. Federal 70.000-000 DF 70074
Brazil
61-4143232 (Phone)
61-2260767 (Fax)

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