Inflation target, interests and prices Brazilian retail industry

Vol. 21 No. 4 (2001)

Oct-Dec / 2001
Published October 1, 2001
PDF-Portuguese (Português (Brasil))
PDF-Portuguese (Português (Brasil))

How to Cite

Costa, Fernando Nogueira da, Simone Silva de Deos, and José Valney de Brito. 2001. “Inflation Target, Interests and Prices Brazilian Retail Industry”. Brazilian Journal of Political Economy 21 (4):705-24. https://doi.org/10.1590/0101-31572001-0948.

Inflation target, interests and prices Brazilian retail industry

Fernando Nogueira da Costa
Livre-docente do Instituto de Economia da Universidade Estadual de Campinas – IE-UNICAMP, Campinas/SP, Brasil. Coordenador da área de Economia da Fundação de Amparo à Pesquisa do Estado de São Paulo – FAPESP.
Simone Silva de Deos
Doutoranda do Instituto de Economia da Universidade Estadual de Campinas – IE-UNICAMP, Campinas/ SP, Brasil. Mestre em Economia pelo Instituto de Estudos e Pesquisas Econômicas da Universidade Federal do Rio Grande do Sul – IEPE/UFRGS, Porto Alegre/RS, Brasil.
José Valney de Brito
Aluno especial do Doutorado do Instituto de Economia da Universidade Estadual de Campinas IE- UNICAMP. Administrador de Empresas pela Fundação Getúlio Vargas – FGV/SP, São Paulo/SP, Brasil.
Brazilian Journal of Political Economy, Vol. 21 No. 4 (2001), Oct-Dec / 2001, Pages 705-724

Abstract

In this paper we analyze inflation targeting, focusing on the interest – price transmission mechanism. Its theoretical foundations are analized based on conventional and alternative literature. We discuss the recent performance of the retail industry in Brazil, highlighting how monetary policy affects prices, both directly and indirectly. We conclude evaluating inflation targeting in a critical way. Our key hypothesis is that interest rates must be seen not only as an instrument to control the general price level and the level of activity, by indirectly regulating aggregate demand. It must also be seen as a fundamental and direct component of the prices formed in the Brazilian retail industry. The big risk of inflation targeting, on the one side, is to increase deflation and, on the other, to create stagflation – unemployment and inflation.

JEL Classification: E31; E52; L81.


Keywords: Inflation target exchange rate regime transmission channels retail