Estabilidad de precios bajo metas de inflación en Brasil: análisis empírico del mecanismo de transmisión de la política monetaria con base en un modelo var, 2000-2008

Modenesi, André de Melo; Araújo, Eliane

doi:10.1016/s0185-1667(13)72588-8

Cited by 17 publications

(5 citation statements)

References 31 publications

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“…However, the slowdown of the economy is not transmitted entirely to prices: the cooling of inflation seems to be disproportionate to the fall in the level of activity. Thus, this corroborates the hypothesis that inflation is not very sensitive to the interest rate (Modenesi and Araújo 2013;Araújo, Araújo, and Ferrari-Filho 2018;André Nassif, Carmen Aparecida Feijó, and Araújo 2018). It is in this sense that the evidence presented here can be interpreted as favorable to the thesis that there are problems in the transmission of monetary policy.…”

Section: Figure 2 Responses Of Output and Inflation To An Exchange Rasupporting

confidence: 88%

“…In other words, as a result of a rise in interest rates, the reduction in the inflation rate is relatively small and takes time to happen. Modenesi and Araújo (2013) and Elisangela Araújo, Araújo, and Fernando Ferrari-Filho (2018) argue that this low sensitivity of inflation to interest rates can be interpreted in part due to failures in the transmission mechanisms of Brazilian monetary policy, so that to achieve the desired effect, the ITR requires an excessively rigid monetary policy.…”

Section: An Empirical Investigation On the Mechanisms Of Monetary Tramentioning

confidence: 99%

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Lessons from the 20 years of the Brazilian inflation targeting regime

Araújo

Arestis

2019

Panoeconomicus

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This paper analyzes the Brazilian experience with the inflation targeting regime (ITR) since its adoption in June 1999. The theoretical analysis starts by covering the New Consensus Macroeconomics (NCM) only policy, in which the ITR is the monetary policy recommendation. This discussion is then complemented first by the current debate in the international mainstream on the need for a flexible ITR that considers the effects of monetary policy on the economy and second by the heterodox discussion on the need to completely abandon the ITR. The discussion on the Brazilian experience and its comparison with international experiences show that Brazil is one of the few countries where the monetary policy objective is restricted to price control and where the horizon for returning inflation to the target is only one year. Within this institutional framework, the Brazilian economy under the ITR is marked by the maintenance of extremely high real and nominal interest rates and with difficulties in meeting the inflation targets. The price control obtained also did not generate the expected externalities in terms of economic growth and employment. After almost 20 years of adopting the ITR in Brazil, it has generated exaggerated contractionary pressures on the Brazilian economy, indicating the need for a thorough examination of monetary institutions in Brazil in order to resume economic growth with price stability and social equity.

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Section: Figure 2 Responses Of Output and Inflation To An Exchange Rasupporting

confidence: 88%

Section: An Empirical Investigation On the Mechanisms Of Monetary Tramentioning

confidence: 99%

Lessons from the 20 years of the Brazilian inflation targeting regime

Araújo

Arestis

2019

Panoeconomicus

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“…In the IRF dependent on Regime 1, a shock in interest rates first has a positive impact on the IPCA and it is only after 12 periods that the interest rate begins to show the expected effects in terms of inflation reduction. It is evident that the inflationary response to an increase in the Selic represents a typical price puzzle situation, as noted by Walsh (2003) and found by other studies on the Brazilian economy (for example, Modenesi and Araújo (2013)). A positive shock in the Selic causes a negative result in industrial production: a valley occurs over four periods, after which there is a recovery and return to the previous level within approximately 15 months.…”

Section: Resultssupporting

confidence: 60%

The Nonlinearity of Brazilian Monetary Policy in the Inflation-Targeting Period: An Analysis Based on an MS-Var Model

Fonseca

Oreiro

Araújo

2018

RAE

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This article theoretically and empirically analyzes the hypothesis of the nonlinearity of Brazilian monetary policy following the implementation of inflation-targeting regime. At the theoretical level, it discusses growth and macroeconomic regimes and their effect over Brazilian economy according to the behavior of a number of variables. Empirically, it tests the hypothesis of the nonlinearity of monetary policy in Brazil, estimating a Markov-switching vector autoregressive (MS-VAR) model. The results identify two different monetary regimes: the first regime, which primarily occurred between 2000 and 2007, and the second regime, which primarily occurred between 2007 and 2013. In the case of the second regime, a contractionary monetary policy had more persistent effects on both the public debt and the exchange rate.

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“…The relatively poor ITR performance in Brazil, with high interest rate not able to ensure lower and stable inflation rates at least close to the international averages, is also backed by other studies. For example, Modenesi & Araújo (2013), based on an econometric analysis of the monetary policy transmission mechanism in Brazil, endorses our claim that inflation is not directly sensitive to the interest rate. In other words, a rise in the policy interest rate generates small, if any, benefits in terms of a fall in the inflation rate.…”

Section: Itr In Brazil: Performance and Theoretical Challengessupporting

confidence: 63%

Excess Real Interest Rates and the Inflation Targeting Regime in Brazil: Monetary Policy Ineffectiveness and Rentiers’ Interests

Filho¹,

Milan²

2018

AEF

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Brazil has had, since the middle 1990s, one of the highest real interest rates in the world, yet not one of the lowest inflation rates. By the end of that decade, an inflation targeting regime (ITR) was introduced. Real interest rates have remained extremely high for international standards, while macroeconomic performance has been dismal on the same grounds. This article argues that these results can be explained by, among others reasons, pressures from the rentiers to frame monetary policy in a way to sustain very high interest earnings in a context where inflation is not very sensitive to monetary policy instruments. Under the ITR, the interest rate seems to have been kept above what would be required to maintain low inflation under normal conditions (even if one assumes a demand-pull inflation, which is not necessarily the case), with a potentially negative impact on growth and employment. This is interpreted as an indicator of monetary policy ineffectiveness. On the empirical ground, this article compares interest rate, inflation, unemployment, and real output growth for Brazil with both ITR and non-ITR countries selected by judgment sampling.

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Estabilidad de precios bajo metas de inflación en Brasil: análisis empírico del mecanismo de transmisión de la política monetaria con base en un modelo var, 2000-2008

Cited by 17 publications

References 31 publications

Lessons from the 20 years of the Brazilian inflation targeting regime

Lessons from the 20 years of the Brazilian inflation targeting regime

The Nonlinearity of Brazilian Monetary Policy in the Inflation-Targeting Period: An Analysis Based on an MS-Var Model

Excess Real Interest Rates and the Inflation Targeting Regime in Brazil: Monetary Policy Ineffectiveness and Rentiers’ Interests

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