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2333-2349

Author

Listed:
  • Helder Ferreira de Mendonça

    (Fluminense Federal University and National Council for Scientific and Technological Development)

  • Roseli da Silva

    (University of São Paulo - RP)

Abstract

This study investigates empirically how the fiscal credibility affects the inflation rate in an emerging economy under inflation target. Based on the Brazilian experience, a fiscal credibility index is built taking into account how the market expectations are anchored to the primary surplus target. The main idea is that a government that is able to anchor expectations around the target (case of high credibility) may reduce inflation. The findings provide empirical evidence that the success of government in achieving the fiscal primary surplus target (gain of credibility) is an important ally to reduce inflation rate and its expectations.

Suggested Citation

  • Helder Ferreira de Mendonça & Roseli da Silva, 2016. "2333-2349," Economics Bulletin, AccessEcon, vol. 32767(4), pages 2333-2349.
    • Handle: RePEc:ebl:ecbull:eb-16-00713
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    File URL: http://www.accessecon.com/Pubs/EB/2016/Volume36/EB-16-V36-I4-P226.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Montes, Gabriel Caldas & Souza, Ivan, 2020. "Sovereign default risk, debt uncertainty and fiscal credibility: The case of Brazil," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    2. Gabriel Caldas Montes & Tatiana Acar, 2018. "Fiscal credibility and disagreement in expectations about inflation: evidence for Brazil," Economics Bulletin, AccessEcon, vol. 38(2), pages 826-843.
    3. Helder Ferreira de Mendonça & Vitor R. C. Britto, 2017. "Interest rate and credit channel for households and firms: Evidence from a large emerging economy," Economics Bulletin, AccessEcon, vol. 37(1), pages 586-604.
    4. Helder Ferreira de Mendonça & Vítor Ribeiro Laufer Calafate, 2021. "Lack of fiscal transparency and economic growth expectations: an empirical assessment from a large emerging economy," Empirical Economics, Springer, vol. 61(6), pages 2985-3027, December.
    5. Montes, Gabriel Caldas & Curi, Alexandre, 2017. "Disagreement in expectations about public debt, monetary policy credibility and inflation risk premium," Journal of Economics and Business, Elsevier, vol. 93(C), pages 46-61.
    6. de Mendonça, Helder Ferreira & Tiberto, Bruno Pires, 2017. "Effect of credibility and exchange rate pass-through on inflation: An assessment for developing countries," International Review of Economics & Finance, Elsevier, vol. 50(C), pages 196-244.
    7. Montes, Gabriel Caldas & Acar, Tatiana, 2020. "Fiscal credibility, target revisions and disagreement in expectations about fiscal results," The Quarterly Review of Economics and Finance, Elsevier, vol. 76(C), pages 38-58.
    8. Gabriel Caldas Montes & Paulo henrique Luna, 2021. "Effects of discretionary fiscal policy and fiscal communication on fiscal credibility: Empirical evidence from Brazil," Economics Bulletin, AccessEcon, vol. 41(3), pages 1486-1500.

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    More about this item

    Keywords

    fiscal credibility; inflation; primary surplus; inflation targeting;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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