This paper assesses the challenges faced by the inflation-targeting regime in Brazil. The confidence crisis in the future performance of the Brazilian economy and the increase in risk aversion in international markets were responsible for a sudden stop of capital inflows in 2002 that caused a...

We develop and estimate a DSGE model for the Brazilian economy, to be used as part of the macroeconomic modeling framework at the Central Bank of Brazil. The model combines the building blocks of standard DSGE models (e.g., price and wage rigidities and adjustment costs) with the following...

This paper assesses the first three years of the inflation-targeting regime in Brazil adopted in July 1999. The inflation-targeting framework has shown to be highly important for the macroeconomic stabilization. We stress three important challenges: construction of credibility, change in...