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Inflation Targets Regime and global financial cycle: An assessment for the Brazilian economy

Elisangela Luzia Araujo, (), Eliane Araujo, Mateus Ramalho da Fonseca () and Pedro Perfeito da Silva ()
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Elisangela Luzia Araujo,: State University of Maring
Mateus Ramalho da Fonseca: Faculty of Maring
Pedro Perfeito da Silva: Central European University

PSL Quarterly Review, 2020, vol. 73, issue 292, 27-49

Abstract: In light of the global financial cycle (GFC), this paper investigates the effectiveness of monetary policy in Brazil since the adoption of the inflation targeting regime. The theoretical section analyses monetary policy from the New Macroeconomic Consensus perspective, emphasizing the implications of the GFC. It also contrasts central bank theory with the post-Keynesian critique. For the empirical investigation, a Markov-switching vector autoregressive model is estimated from January 2000 to December 2017, combining the common variables from the empirical literature with the proxy for the GFC. The main results suggest that greater financial instability has a direct effect on domestic inflation.

Keywords: inflation target regime; global financial cycle; Brazil (search for similar items in EconPapers)
JEL-codes: C14 E12 E42 (search for similar items in EconPapers)
Date: 2020
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