New macroeconomic consensus and inflation targeting: Monetary Policy Committee directors’ turnover in Brazil
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Data
2013
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Resumo
The main objective of this paper is to estimate a Central Bank reaction function that accounts for the effects of directors’ rotation ofthe Brazilian COPOM (Monetary Policy Committee). The reaction function proposed is assumed to be the mechanism for inflationtargeting policy. It accounts for the COPOM rotation to examine COPOM’s policy credibility. The empirical analysis use monthlydata from 2001 to 2008 to estimate a structural vector auto-regression (SVAR) in order to learn about the long run effects. The SVARresults suggest that the turnover of the COPOM board of directors affects inflation expectation and interest rate of the Brazilianeconomy in the long run. This means that the turnover causes economic agents to increase their expectations about inflation, resultingin increases of the rate of change of the interest rate level. This break in credibility leads to an additional cost to society throughhigher future interest rates to be paid by government bonds.
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Monetary policy, Interest rates, New consensus macroeconomics, Central Bank, Política monetária, Banco Central, Taxas de juro, Novo consenso macroeconômico
Citação
DIAS, Maria Helena Ambrosio; TEIXEIRA, Anderson Mutter; DIAS, Joilson. New macroeconomic consensus and inflation targeting: Monetary Policy Commiittee director's turnover in Brazil. Economia, Brasília, v. 14, n. 3/4, p. 158-170, 2013.