Inflation targeting in Brazil: 1999-2006

This paper describes the Brazilian experience with inflation targeting in 1999-2006. The data presented in the paper show that inflation targeting managed to reduce inflation in Brazil after its 1999 and 2002 currency crises, with a substantial help of exchange-rate appreciation. The data also show that economic growth was slow under inflation targeting than during exchange-rate targeting in Brazil, but with a smaller volatility and an apparent upward trend during inflation targeting than during exchange-rate targeting. The paper also shows that inflation targeting reduced the real interest rate of the economy, which nevertheless remained well above international standards and more than three times higher than the Brazilian gross domestic product growth rate.