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Did The Taylor Rule Stabilize Inflation in Brazil?

Rodrigo De-Losso

No 2012_21, Working Papers, Department of Economics from University of São Paulo (FEA-USP)

Abstract: This paper characterizes the monetary policy in Brazil through a forward-looking Taylor-rule-type reaction function before and after the Real plan, which stabilized inflation in July 1994. The results show that the interest rate response to inflation was greater than one-to-one before stabilization and smaller than that afterwards, hence inverting the Taylor’s principle. Several robustness checks, using mainly distinct proxies for output, output gap and data frequency strongly confirm the findings.

Keywords: Taylor Rule; inflation targeting; inflation stability (search for similar items in EconPapers)
JEL-codes: C32 C51 E52 E58 (search for similar items in EconPapers)
Date: 2012-09-16
New Economics Papers: this item is included in nep-mac and nep-mon
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