Preferences of the Central Bank of Brazil under the inflation targeting regime: estimation using a DSGE model for a small open economy

Available from: 
October 2013
Paper author(s): 
Andreza Aparecida Palma (UFRGS)
Marcelo Savino Portugal (UFRGS)
Topic: 
Macroeconomics - Economic growth - Monetary Policy
Year: 
2013


The main objective of this paper is to estimate the preferences of the Central Bank of Brazil after the inflation targeting regime (January 2000 to June 2011), using a DSGE model with microeconomic foundations for a small open economy, based especially on the work of Kam, Lees and Liu (2009). The model used in this study considers that the Central Bank minimizes a loss function, taking into account the deviation of inflation from its target, output stabilization, the interest rate smoothing and, unlike the previous works, the exchange rate. The results allow us to affirm that the major concern of the monetary authority in the period was the stabilization of
inflation, followed by interest rate smoothing, output stabilization and, finally, exchange rate stabilization.

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Research section: 
Lacea 2013 annual meeting
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