Inflation targeting in Brazil

The purpose of this paper is to examine the Inflation Targeting (IT) framework as it is applied in the case of Brazil since its adoption in June 1999. For this purpose we first summarize the macroeconometric model utilized by the Central Bank of Brazil (BCB) in its pursuit of the IT framework. While the focus of this paper is on Brazil, we also examine the experience of other countries with IT (in particular, the BRIC countries: Brazil, Russia, India, and China), both for comparative purposes and for evidence of the extent of success of this ‘new’ economic policy pursued by other IT countries. In addition, we compare the experience of Brazil with IT and with that of non‐IT countries. In the context of non‐IT countries, we ask the question of whether it makes a difference in the fight against inflation whether a country has adopted IT or not. Finally, we examine some features of the Brazilian experience with IT regime.