Has the Central Bank of Brazil’s reaction function become destabilizing?

Prof. Thiago Lopes

25/05/2017 – Quinta-feira
15:30 às 16:30
Sala: Auditório do CCSA II


The purpose of this paper is to estimate a forward-looking monetary policy reaction function for the Brazilian economy over the 2003 to 2016 period. Additionally, we test whether the two main parameters of this reaction function, the gaps between expected inflation and output and their respective target levels, changed under Alexandre Tombini’s chairmanship of the Central Bank of Brazil (2011.01 to 2016.05). The main results of the study suggest that: i) the monetary policy rule followed by the Central Bank of Brazil was not destabilizing; ii) during the Tombini era, the output gap parameter increased and the expected inflation gap decreased, but the monetary policy rule remained compatible with macroeconomic stability, and iii) there is evidence that the Central Bank of Brazil took exchange rate shocks into consideration in its reaction function.



Federação das Indústria do Estado de Sergipe – FIES

Observatório de Sergipe


University of Illinois at Urbana-Champaign

Universidade de Oviedo
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