Does the Central Bank of Brazil cares about expected inflation?

• Autor(a) principal: Crispim, Pedro
• Data de Publicação: 2022
• Tipo de documento: Dissertação
• Idioma: eng
• Título da fonte: Biblioteca Digital de Teses e Dissertações da USP
• Texto Completo: https://www.teses.usp.br/teses/disponiveis/12/12138/tde-17022023-201641/
• topic: Filtro de Kalman; Inflation targeting; Kalman filter; Metas para inflação; Parâmetros variantes no tempo; Regra de Taylor; Taylor rule; Time-varying parameters

The purpose of this dissertation is to characterize Brazils monetary policy conduction under the inflation targeting regime that started in 1999 for different Central Bank of Brazil (BCB) chairman tenures. The methodology adopted consists in estimating a forward-looking Taylor rule with parameters that can vary through time using Kalman filter. Specifically, to handle with the endogeneity problem of forward-looking rules estimated with ex-post data under a time-varying parameters framework, we adopt a similar approach to the two-stage method originally suggested by Kim and Nelson (2006). Regarding results, using data from 2000 to 2020, estimates suggest that BCB chairmans were for the great majority of time for the analyzed period seeking a stabilizing monetary policy and following the guidelines of the inflation target framework. In this sense, given the results and what they suggest, we attribute the failure to meet the target in certain years much more to the fact that Brazil is a newly democratic emerging market economy subject to many domestic and external shocks than with a disregard of the BCB with monetary policy stabilization.