Real Interest Rate Targeting: An Example From Brazil

Eric Clifton

No 1990/111, IMF Working Papers from International Monetary Fund

Abstract: This paper examines a real interest rate targeting procedure based on lagged inflation similar to the policy followed by the Brazilian monetary authorities during the period November 1986 to December 1988, focusing on the issue of the determinacy of the price level. For the specific model examined, the analysis suggests that such a targeting procedure would not suffer from the frequently noted defect of nominal interest rate targeting rules of leaving the conditional expectation of the next period price level undetermined.

Keywords: WP; interest rate; real interest rate policy; targeting procedure; policy rule; interest rate rule; government securities market; target rule; period price level; Real interest rates; Inflation; Interest rate policy (search for similar items in EconPapers)
Pages: 26
Date: 1990-12-01
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Citations: View citations in EconPapers (3)

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