Supply Shocks and Inflation Targeting

Fabio Kanczuk

Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31st Brazilian Economics Meeting] from ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics]

Abstract: We construct a dynamic general equilibrium model, calibrated to the Brazilian economy, in which a fraction of the firms set prices one quarter in advance. The artificial economy simulations generate series consistent with real data and with a typical estimation of a structural inflation-targeting model. We argue that these structural models specifications are incorrect for not considering supply shocks. In contrast, our model can separate supply and demand shocks effects, in addition to being (potentially) robust to the Lucas’ Critique.

Keywords: Brazil; Real Business Cycles; Sticky Prices (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2003
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
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