The Political Economy of Monetary Institutions in Brazil: The Limits of the Inflation-targeting Strategy, 1999-2005

Matías Vernengo

Review of Political Economy, 2008, vol. 20, issue 1, 95-110

Abstract: This paper suggests that the time-inconsistency approach is inadequate to analyze the political economy of monetary policy in Brazil. The paper develops an alternative theory that emphasizes distributive conflict, and argues that building credibility with a fixed exchange rate and through inflation-targeting was not central for stabilization. A contested-terrain analysis of the Brazilian case suggests that the current monetary regime benefits financial or rentier interests while the manufacturing sector and workers bear the costs of this policy.

Date: 2008
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DOI: 10.1080/09538250701661863

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