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Excess Real Interest Rates and the Inflation Targeting Regime in Brazil: Monetary Policy Ineffectiveness and Rentiers’ Interests

Applied Economics and Finance

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Title Excess Real Interest Rates and the Inflation Targeting Regime in Brazil: Monetary Policy Ineffectiveness and Rentiers’ Interests
 
Creator Filho, Fernando Ferrari
Milan, Marcelo
 
Description Brazil has had, since the middle 1990s, one of the highest real interest rates in the world, yet not one of the lowest inflation rates. By the end of that decade, an inflation targeting regime (ITR) was introduced. Real interest rates have remained extremely high for international standards, while macroeconomic performance has been dismal on the same grounds. This article argues that these results can be explained by, among others reasons, pressures from the rentiers to frame monetary policy in a way to sustain very high interest earnings in a context where inflation is not very sensitive to monetary policy instruments. Under the ITR, the interest rate seems to have been kept above what would be required to maintain low inflation under normal conditions (even if one assumes a demand-pull inflation, which is not necessarily the case), with a potentially negative impact on growth and employment. This is interpreted as an indicator of monetary policy ineffectiveness. On the empirical ground, this article compares interest rate, inflation, unemployment, and real output growth for Brazil with both ITR and non-ITR countries selected by judgment sampling.
 
Publisher Redfame Publishing
 
Contributor —
 
Date 2018-10-23
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://redfame.com/journal/index.php/aef/article/view/3710
10.11114/aef.v5i6.3710
 
Source Applied Economics and Finance; Vol 5, No 6 (2018); 84-100
2332-7308
2332-7294
 
Language eng
 
Relation http://redfame.com/journal/index.php/aef/article/view/3710/3870
 
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