Exchange rate, interest rate and prices in the Brazilian system of inflation targets / Taxa de câmbio, taxa de juros e preços no regime brasileiro de metas de inflação

AUTOR(ES)

Marlon Bruno Salazar

DATA DE PUBLICAÇÃO

2008

RESUMO

The deployment of a new system of monetary policy at the end of the decade of 1990 meant major changes in policy to combat inflation in Brazil. By the year 1999 monetary policy was restrictive, with an exchange rate that could be valued. After July 1999, the Central Bank started to have only one goal: to keep inflation under control, for that, it had as only instrument the rate of interests. In the following years to the establishment of the new regime, inflation converged to the fixed targets, however, in 2002, a year of political crisis, inflation exceeded the upper limit established, which raised doubts about the power of the interest rate to keep inflation within the limits. This work was intended to examine the influences of the interest rate, exchange rate and product (GDP) on prices. The theoretical models used shows that raising the interest rate implies recovery of the exchange rate and thus reduction in the level of prices of the economy. It was used the model of Vectors Self Regressive Structural (SVAR) to test the importance of the new regime to control inflation by changes in interest rate. The IPCA was influenced by unexpected shocks on the interest rate, this influence was not repeated when the variable that received the shock was the exchange rate. The interest rate was not important in determining the exchange rate; initially, an increase in interest rate devalues the exchange rate until the third month and from this month on the influence aims to recovery. Another found result is that an increase in the IPCA causes immediate lifting on the interest rate, this influence remains until the sixth month after the shock (from this point forward the effect is negative). Regarding the decomposition of the variance from prediction errors, the IPCA had a major importance to explain the change in the rate of interest, the exchange rate was little determined by change in interest rates, which were more important to explain changes in the IPCA than the exchange.

ASSUNTO(S)

taxa de câmbio exchange rate teoria monetaria e financeira metas de inflaçãomodelo var inflation targets var model

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