Inflation targeting in Latin America: the role of the exchange rate

• Grant number: 17/23188-6
• Support Opportunities: Scholarships in Brazil - Master
• Start date: March 01, 2018
• End date: February 28, 2019
• Field of knowledge: Applied Social Sciences - Economics - Fiscal and Monetary Policies
• Agreement: Coordination of Improvement of Higher Education Personnel (CAPES)
• Principal Investigator: Fernando Monteiro Rugitsky
• Grantee: Lucas Antonio Moises Freddo
• Host Institution: Faculdade de Economia, Administração e Contabilidade (FEA). Universidade de São Paulo (USP). São Paulo , SP, Brazil
• Associated research grant: 14/11611-3 - Public sphere and reconstruction: on the constitution of a reconstructive paradigm within Critical Theory, AP.TEM

Abstract

Inflation Targeting has become a common monetary policy framework in Emerging Market Economies (EME). According to Taylor (2001), if the monetary policy is not based on exchange rate targets, the only remaining alternative capable of ensuring price stability in the long-run is one based on (i) inflation targets, (ii) flexible exchange rate, and (iii) monetary policy rule, which he called trinity. Nevertheless, the exchange rate still remains a variable of importance for EME. Particularly, the pass-through from exchange rate changes to prices is considerably high and, throughout periods of crisis, characterized by capital outflows, the exchange rate usually suffers from sharp depreciation, making monetary authorities concerned about its movement. In this vein, the objective of this research project is to estimate the monetary policy reaction function - including the exchange rate as its argument - for Latin American countries under Inflation Targeting, in order to verify whether monetary authorities regulate the exchange rate and whether they asymmetrically behave towards its movements, being tolerant with currency appreciation, but intolerant with currency depreciation. The contribution relies on the fact that the results will enlarge the understanding of this monetary policy, with special attention to the role played by the exchange rate in Latin America. (AU)

Academic Publications

(References retrieved automatically from State of São Paulo Research Institutions)

FREDDO, Lucas Antonio Moises. Inflation targeting in Latin America: the role of the exchange rate. 2019. Master's Dissertation - Universidade de São Paulo (USP). Faculdade de Economia, Administração e Contabilidade (FEA/SBD) São Paulo.