Elusive Unpleasantness

Carlos Goncalves, Mauro Rodrigues and Fernando Genta ()

No 2022_16, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: As first argued in Sargent and Wallace (1981), under certain conditions a tighter monetary policy today might give rise to higher expected inflation if the public perceives that the worsened debt dynamics could end up in debt monetization. This channel is arguably stronger in countries featuring high debt and interest rates, along with weaker economic institutions. Brazil is a large emerging economy that fits the profile. Yet, using a high-frequency identification strategy, we show that higher interest rates lead to unequivocally lower inflation expectations (and local currency appreciation) around Brazil’s Central Bank monetary policy meetings.

Keywords: monetary policy; inflation expectations; Brazil (search for similar items in EconPapers)
JEL-codes: E31 E43 E52 (search for similar items in EconPapers)
Date: 2022-06-24
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dem, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.repec.eae.fea.usp.br/documentos/Goncalves_Rodrigues_Genta_16WP.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spa:wpaper:2022wpecon16

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in Working Papers, Department of Economics from University of São Paulo (FEA-USP) Contact information at EDIRC.
Bibliographic data for series maintained by Pedro Garcia Duarte ( this e-mail address is bad, please contact ).