Alenca , Douglas Alcân a a; Pe ei a, Wallace Ma celino; Lima, And essa; Caldas,
Lucas
A icle
Mone a y policy and in la ion expec a ions in B azil: F om
2005 o 2022
Jou nal o Business and Economic S udies (JBES)
P o ided in Coope a ion wi h:
No heas Business and Economics Associa ion (NBEA)
Sugges ed Ci a ion: Alenca , Douglas Alcân a a; Pe ei a, Wallace Ma celino; Lima, And essa; Caldas,
Lucas (2024) : Mone a y policy and in la ion expec a ions in B azil: F om 2005 o 2022, Jou nal
o Business and Economic S udies (JBES), ISSN 2576-3458, No heas Business and Economics
Associa ion (NBEA), Po Je e son, NY, Vol. 28, Iss. 2, pp. 1-17
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Jou nal o Business and Economic S udies Vol. 28 Issue 2
Mone a y Policy and In la ion Expec a ions in B azil: F om 2005 o 2022
Douglas Alenca
Fede al Uni e si y o Pa á
E-mail: [email p o ec ed]
Wallace Pe ei a
Fede al Uni e si y o Pa á
E-mail: [email p o ec ed]
And essa Lima
Fede al Uni e si y o Pa á
E-mail: [email p o ec ed]
Lucas Caldas
Fede al Uni e si y o Pa á
E-mail: [email p o ec ed]
Abs ac
The Focus Repo p epa ed by he Cen al Bank o B azil summa izes he s a is ics
calcula ed om ma ke expec a ions, such as in la ion expec a ions o he nex ou yea s ha
a e weekly collec ed. The epo shows he e olu ion o hese da a using g aphs and weekly
p ojec ions o p ice indices, economic ac i i y, and exchange a es. Howe e , he expec a ions
o households and i ms ega ding he u u e o in la ion, which a e de e minan s o cu en
in la ion, go beyond p oblems o heo e ical and empi ical ounda ion. Thus, he esea ch
ques ion add essed in his s udy is as ollows: Do expec a ions o in la ion measu ed by he
Focus Ma ke Repo explain in la ion measu ed by he CPI in B azil? To answe his ques ion,
we compa e expec ed and ac ual in la ion da a and analyze he co ela ions be ween hem. This
esea ch is impo an because pa o he a gumen o inc easing he basic in e es a e in he
B azilian economy is based on da a om he Focus Repo , which may con ain o ecas ing
e o s, he eby esul ing in mone a y policy mis akes. The esea ch me hodology consis s o
con as ing da a on mon hly expec a ions wi h ac ual in la ion a es and assessing he
co ela ions be ween hem.
Keywo ds: mone a y policy, in la ion, expec a ions, Focus Ma ke Repo , B azil
JEL codes: E12, E52
1. In oduc ion
The heo e ical models de eloped by Phelps, F iedman, and Lucas a e capable o
in ui i ely demons a ing ha expec ed in la ion plays a undamen al ole in he in la iona y
ajec o y. The unde lying easons lie in he assump ions o he pe sis en mone a y illusion and
mic o ounda ions, which a e pa icula ly g ounded in he concep o p ice igidi y. This
amewo k unde pins he mone a y policy in a ious economies wo ldwide (Rudd 2022).
The implica ions o economic policy managemen a e ha , based on expec a ions, he
mone a y au ho i y can p ojec u u e in la ion and moni o he abili y o comba sha p p ice
luc ua ions in line wi h he cen al objec i e. This heo e ical amewo k plays a cen al ole
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 2
in shaping expec a ions ega ding in la ion wi hou necessa ily explaining he cons i u i e
elemen s in de ail. Nei he he op imal measu emen me hod no he agen s o be consul ed a e
discussed. Fu he mo e, whe he expec a ions exhibi a uni o m pa e n and can a ec in la ion
dynamics in any ype o economy is no explo ed.
Fo example, he Focus Repo p epa ed by he Cen al Bank o B azil summa izes
s a is ics calcula ed based on ma ke expec a ions. No ably, he epo highligh s in la ion
expec a ions o he nex ou yea s collec ed weekly. This epo illus a es he e olu ion o
hese da a, such as h ough g aphs and weekly p ojec ions o p ice indices, economic ac i i y,
and exchange a es.
As Rudd (2022) a gues, he expec a ions o households and businesses ega ding u u e
in la ion a e among he main de e minan s o ac ual in la ion. Howe e , hese expec a ions,
which a e c ucial o cu en in la ion, go beyond heo e ical and empi ical ounda ions. Thus,
his s udy explo es he ollowing esea ch ques ion: Do in la ion expec a ions measu ed by he
Focus Ma ke Repo explain in la ion measu ed aken by he IPCA (B oad Na ional Consume
P ice Index) in B azil? The e o e, his s udy assesses he impac o expec a ions, as measu ed
by he Focus Ma ke Repo , on ac ual in la ion, as measu ed by he o icial B azilian p ice
index. We compa e expec ed and ac ual in la ion da a and analyze he co ela ions be ween
hem. This s udy is impo an because pa o he a gumen in a o o aising he basic in e es
a e in he B azilian economy elies on da a om he Focus Repo , which may con ain
p edic ion e o s, po en ially leading o misguided mone a y policies. Acco ding o Ve eda e
al. (2020), be ween 2001 and 2019, he c edibili y o he mone a y au ho i y oscilla ed be ween
wo opposing poles. De e io a ion was con inuous be ween mid-2007 and 2016, a which poin
c edibili y was egained and has been e ained since.
The emainde o his pape is o ganized as ollows. Sec ion 2 ocuses on in la ion
expec a ions, while Sec ion 3 p esen s his o ical con ex o he mone a y policy in B azil om
2005 o 2022. Sec ion 4 p esen s an empi ical exe cise used o es he hypo hesis ha in la ion
expec a ions a ec o icial in la ion in B azil. Finally, Sec ion 5 p o ides he s udy’s
conclusions.
2. In la ion Expec a ions
Conside ing he New Keynesian app oach and, he e o e, he in la ion a ge ing model,
he Phillips Cu e in i s accele a ionis e sion is signi ican o unde s anding cen al bank
ac ions ega ding in e es a es. In his sec ion, we discuss he key aspec s o he Phillips Cu e,
pa icula ly in e ms o i s accele a ionis e sion.
As Rudd (2022), Ca lin and Sosckice (2005), and A es is (2011) ha e shown, he
a iable o expec a ions ega ding u u e in la ion is a c ucial componen o he New Economic
Consensus and New Keynesian models. Expec a ions ega ding u u e in la ion appea in he
mone a is e sion o he Phillips Cu e and a e e ained in he New Keynesian model. Cen al
banks ha e emb aced his, a guing ha in la ion expec a ions a ec cu en in la ion. Thus,
cen al banks assess whe he in la ion expec a ions o he u u e align wi h in la ion a ge s. I
he expec a ions do no poin owa ds he in la ion a ge , he cen al bank a emp s o ancho
expec a ions by inc easing he in e es a e.
The Phillips Cu e is based on he pionee ing wo k published by A.W. Phillips in 1958.
I add esses he in e se ela ionship be ween he in la ion a e and unemploymen , allowing a
adeo o be es ablished be ween hese wo a iables (Figu e 1). To illus a e he applica ion
o he Phillips Cu e, le us assume an inc ease in he money supply om 3% o 5% (a 2%
inc ease), which, consequen ly, will lead o an inc ease in agg ega e demand and a subsequen
ise in nominal wages.
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 3
Acco ding o F iedman (1968), an inc ease in income leads o a educ ion in he
unemploymen a e because mo e indi iduals accep he o e ed nominal wages. The ou pu o
he economy esponds o he g ow h in agg ega e demand, compelling p oduce s o augmen
hei employee numbe s, p oduc ion, and wo king hou s. This su ge in agg ega e demand also
exe s an upwa d p essu e on p ices, he eby inc easing he in la ion a e. Thus, low
unemploymen a es signi y inc eased in la ion, whe eas high unemploymen a es diminish
his e ec .
Figu e 1 – Phillips Cu e (CP)
As Figu e 1 abo e illus a es, a an in la ion a e o ze o, he unemploymen a e is 6%.
Mo ing along he cu e, a 4% unemploymen a e inc eases he in la ion a e by 2%,
demons a ing a ade-o be ween unemploymen and in la ion. Acco ding o F iedman, an
inc ease in employmen is only possible because agen s ha e se wages and p ices o he
u u e, making i ake some ime o labo supplie s o ealize ha p ices ha e isen mo e han
nominal wages (i.e., eal wages ha e no dec eased). Howe e , his model ope a es only in he
sho e m.
In he long e m, he adap i e expec a ions hypo hesis posi s ha indi iduals adjus hei
expec a ions o p e en epea ing pas e o s. The e o e, i in a p e ious pe iod, labo supplie s
unde es ima ed in la ion in he subsequen pe iod, hey adap ed hei expec a ions by
inco po a ing p e iously acknowledged expec a ions. Thus, he equa ion is as ollows:
𝜋𝑡
𝑒 = 𝜋𝑡−1
𝑒+ β (𝜋𝑡−1- 𝜋𝑡−1
𝑒) (1)
whe e β is he speed o co ec ions o expec a ions. I we conside ha β = 1, he esul o he
equa ion will be 𝜋𝑡
𝑒 = 𝜋𝑡−1. This demons a es ha labo supplie s assume ha analyzing he
pas is he mos e ec i e me hod o specula ing abou he p esen and u u e. The e o e, o
in la ion o dec ease, a de la iona y shock becomes necessa y, causing unemploymen o ise
a a a e abo e he na u al a e and p essu ing indi iduals o e ise hei expec a ions.
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 4
Thus, he Phillips Cu e can be conside ed o become e ical in he long e m as soon
as agen s an icipa e he p ocess o p ice inc eases, which demands highe eal wages (Figu e
2). Consequen ly, highe in la ion and unemploymen will e u n o hei na u al a es. E en i
economic policymake s a emp o ix employmen a a le el lowe han he na u al a e by
inc easing he money supply, agen s' expec a ions will always shi he cu e upwa d and o
he igh un il decision-make s ealize ha in la ion has become a mo e se ious p oblem han
unemploymen .
Figu e 2 - Augmen ed Phillips Cu e
In his scena io, ac ions o con ain in la ion by inc easing unemploymen do no ha e
immedia e e ec s. Simila o indi iduals aking some ime o ealize ha eal wages ha e
dec eased, i akes ime o hem o ecognize ha he in la ion a e has dec eased and accep
lowe nominal wages.
The heo e ical models o Phelps, F iedman, Lucas, Rapping, and he pos -Keynesians
highligh he impo ance o conside ing expec ed in la ion as a key de e minan o ac ual
in la ion. These a gumen s con ibu e o explaining he Phillips Cu e and in la iona y
expe imen s om 1960 o 1980 in he Uni ed S a es.
The ull u iliza ion o hese economis s' heo e ical models has policy implica ions.
Acco ding o Rudd (2022), o an in la ion analys , expec ed in la ion measu es can explain
he e olu ion o pas in la ion and p ojec in la ion measu es. Fo a mone a y au ho i y such as
he Cen al Bank, success ully con olling in la ion expec a ions is ul illing i s objec i es.
Edmund Phelps' model s a es ha he in e cep o he Phillips Cu e would shi one-
o-one wi h expec ed in la ion, as labo supply would be independen o he in e es a e and,
consequen ly, independen o expec ed in la ion. Thus, acco ding o Phelps (1967), nominal
a iables do no pe manen ly a ec eal a iables. The e o e, Phelps's model igno es he
consequences ha an icipa ion o in la ion may ha e on cu en eal income.
Howe e , F iedman (1968) has asse ed ha labo supplie s accep wo k based on ex-
pos eal wages. Labo supplie s would ake some ime o pe cei e an inc ease in gene al p ice
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 5
le els. In his model, inc eased employmen is possible only when p ices inc ease, he eby
educing eal wages. Howe e , when wo ke s an icipa e p ice inc eases, he esul is e lec ed
in nominal wages, lea ing eal wages unchanged.
Acco ding o Rudd (2022), he heo ies o bo h Phelps and F iedman conside ha
nominal dis u bances canno ha e pe manen eal e ec s on he economy and ha he ma ke
will always e u n o i s na u al equilib ium. Fu he mo e, bo h heo ies asse he exis ence o
a eal side o he economy ha exe s i s in luence, ega dless o nominal a ia ions.
Fishe (1983) c i icizes his, s a ing ha no con incing e idence exis s on he s abili y
o economic equilib ium. Acco ding o F iedman's de i a ion o he Phillips Cu e, wages a e
coun e cyclical and companies a e always on hei demand cu e. Fo F iedman, he selling
p ices o p oduc s eac mo e quickly han wages. Howe e , US da a ha e shown ha wages
a e p ocyclical because con en ional equa ions indica e ha he ade-o be ween wage
in la ion and employmen is mo e p onounced han p ice in la ion.
Lucas and Rapping ha e p oposed ano he heo y ha emphasizes he ela ionship
be ween expec ed and eal in la ion. In hei model, eal (expec ed) in e es a es a ec he
cu en labo supply, he eby in luencing he adeo be ween goods and leisu e. The model
also ein o ces he exis ence o adap i e expec a ions and one- o-one adjus men s in nominal
in e es a es.
This model assumes ha an inc ease in he cu en in la ion a e will inc ease he
expec ed in la ion a e, which is alid only h ough a speci ic o mula ion o adap i e
expec a ions. This assump ion sugges s ha in la ion con e ges o a s eady s a e. Fu he mo e,
signi ican employmen luc ua ions canno be assumed wi hou co espondingly la ge
in e empo al subs i u ion luc ua ions.
In 1973, Lucas de eloped a model o analyze ma ke p ices and de e mine whe he a
speci ic p ice dis u bance was an absolu e o ela i e change. This was because p oduce s could
no dis inguish be ween such changes, leading o p ice a ia ions. C i icisms o his Lucas
su p ise model include he signi ican di icul y in de e mining whe he p ice le els ha e an
absolu e a ia ion. Mo eo e , he assump ion ha poli ical shocks alone can a ec p oduc ion
seems exagge a ed. Ball e al. (1988) a gue ha he s anda d de ia ion o in la ion, which is
c ucial in he ou pu -in la ion ade-o , lacks empi ical suppo .
Finally, he Keynesian Phillips Cu e models in eg a e a ional expec a ions in o a
model in which adjus men cos s p oduce nominal igidi y, which makes cu en in la ion
dependen on expec ed in la ion. One c i icism o his model is ha he p oduce s a e o ced o
p o ide he quan i y demanded a a ixed con ac p ice. The e o e, companies a e always
conce ned wi h eal p ices. A u u e dec ease in hei p ices will make he addi ional gene a ed
demand less p o i able when he con ac ually ag eed upon nominal p ice is sa is ied.
Empi ically, Keynesian Phillips Cu e models also ha e assump ions ha do no make sense.
Acco ding o Rudd (2022), s anda d es s o he new Phillips Cu e ha e so many p oblems
ha hey do no p o ide su icien a gumen s o p o e ha expec a ions uly ma e .
Fi ms’ beha io al pa e ns show ha hey a ely inc ease hei p ices in an icipa ion.
Mos i ms aise p ices only when hei cos s a e a ec ed. In addi ion, a pe ec compe i i e
s uc u e in which e e yone compe es agains each o he seems somewha unlikely, as wo ke
and cus ome compe i ion ha e a s ong local o indus y-speci ic in luence. Rudd (2022)
a gues ha he models p esen ed show ha sho - e m expec ed in la ion is he only a gumen
in which expec a ions ma e . Mos a gumen s a e based on limi ed e idence and comple ely
disag ee wi h he a ailable empi ical esul s.
One impo an obse a ion ha suppo s he a gumen ha expec ed in la ion is no
c ucial is wo ke beha io . Acco ding o Rudd (2022), in analyzing he pos -1990 economic
scena io, o claim ha labo supplie s igno e inc eases in he cos o li ing when accep ing
wo k o lowe eal wages, belie ing ha in la ion will e u n o he long- e m a e age, would
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 6
be inco ec . In he con ex o wage nego ia ions, employe s end o pay wages ha ma ch he
cos o li ing o labo -supplie agen s in exchange o hei con inued employmen . O he wise,
a signi ican numbe o layo s would o ce business owne s o inc ease he wages o he
emaining wo ke s.
Simila ly, when in la ion emains low, employees' conce ns abou he cos o li ing
dec ease. Howe e , as Rudd (2022) a gues, ‘ his is a s o y abou ou comes, no expec a ions’
(p. 37). This heo y asse s ha labo supplie s expec in la ion o e u n o i s long- e m
a e age; howe e , in eali y, wo ke s simply do no conside ecen wage inc eases o lag
behind u u e changes in he cos o li ing. The cu en s a e o in la ion dynamics shows ha
people do no lea e hei jobs because wages a e no keeping pace wi h he cos o li ing, as
in la ion does no a ec wo ke s o wages.
Fo Rudd (2022), he concep o adap i e expec a ions is i ele an because no e idence
indica es ha wo ke s nego ia e highe nominal wages o an icipa e in la ion. Rudd (2022)
a gues ha when policymake s use in la ion expec a ions o de e mine long- e m in la ion, hey
can gene a e excessi e conce ns ega ding which pa h in la ion will ollow o whe he i will
e u n o a egime wi h high in la ion pe sis ence.
3. Mone a y Policy in B azil om 2005 o 2022
Mone a y policy plays a c ucial ole in a coun y’s economic s abili y and is a p ima y
ool go e nmen s employ o con ol a ious inancial ac o s. In B azil, his esponsibili y alls
upon he Cen al Bank, which seeks economic balance h ough egula ing he money supply
and de e mining in e es a es.
To main ain s abili y and p omo e economic de elopmen , he go e nmen u ilizes
mone a y policy o adjus he money supply acco ding o ma ke condi ions. Du ing g ow h
pe iods, measu es may be adop ed o p e en economic o e hea ing, such as aising in e es
a es o discou age excessi e consump ion and in es men . Con e sely, in ecessions, he
go e nmen may seek o s imula e economic ac i i y by lowe ing in e es a es and inc easing
he money supply.
The Cen al Bank is asked wi h de ining mone a y policy and bases i s decisions on a
de ailed analysis o economic da a. To achie e he p ima y goal o in la ion con ol, he
Na ional Mone a y Council no malizes mone a y policy, while he Cen al Bank's Mone a y
Policy Commi ee (COPOM) con ols in e es a es. Th ough COPOM, he go e nmen and
Cen al Bank es ablish goals o con ol in la ion and implemen expansiona y o con ac iona y
policies as needed, depending on he beha io o he B azilian economy (Ribei o e al., 2023).
Mone a y policy in B azil has unde gone a ious ans o ma ions h oughou i s his o y.
This s udy analyzes he e olu ion o mone a y policy in B azil om 2004 o 2020, highligh ing
key momen s and he main changes o e ime. In a scena io ma ked by skep icism, Luiz Inácio
Lula da Sil a won he p esidency in he 2002 elec ions. Upon Lula beginning his i s e m in
2003, he go e nmen aced imminen challenges, including he u gen need o educe in la ion,
which had eached app oxima ely 12.5% in he p e ious yea owing o signi ican de alua ion
in 2002.
Addi ionally, a p essing need exis ed o educe he o al ne public deb , ep esen ing
app oxima ely 52% o he G oss Domes ic P oduc (GDP), and inc ease in e na ional ese es,
which o aled US$ 37.8 billion in 2002, including he US$ 20.8 billion bo owed om he
In e na ional Mone a y Fund (IMF) (Da Sil a, 2017). Gi en he ad e se condi ions du ing he
ea ly mon hs o he Lula adminis a ion, measu es we e implemen ed o e e se he si ua ion.
In Feb ua y 2003, in esponse o he un a o able en i onmen , he Cen al Bank aised he
Special Sys em o Se lemen and Cus ody (SELIC) in e es a e and, consequen ly, he eal
in e es a e, aiming o cu b cu ency de alua ion and i s po en ial in la iona y e ec s.
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 7
Go e nmen au ho i ies deemed his ac ion essen ial because o ising in la ion, which
exceeded 12%, su passing he es ablished a ge o 6.5%. Mo eo e , unce ain y ega ding
na ional economic policy demanded measu es ha ea i med he coun y’s commi men o
o hodox policies, such as p ice s abili y and iscal esponsibili y (Ba bosa and Souza 2010,
ci ed in Da Sil a 2017).
Howe e , he in e es a e inc ease p o ed insu icien o align in la ion wi h he
go e nmen 's a ge . In la ion did no begin o decline un il 2004, wi h an a e age app ecia ion
o 4.95% in he exchange a e. Seizing his oppo uni y, he Cen al Bank ini ia ed a g adual
educ ion in bo h he SELIC and eal in e es a es, eaching a es o 16.00% and 4.58%,
espec i ely, in July. These dec eases boos ed consump ion, esul ing in signi ican economic
g ow h, eaching a a e o 5.7%, while in la ion a e aged 0.4% below he uppe limi o he
a ge (Da Sil a 2017).
This apid economic eco e y aised conce ns among mone a y au ho i ies, who ea ed
ha in la ion would inc ease. In esponse, he Cen al Bank again aised he SELIC and eal
in e es a es in Sep embe 2004, o 16.25% and 11.59%, espec i ely. These measu es we e
implemen ed o con ain he expec a ion o ising in la ion and ensu e economic s abili y (Da
Sil a 2017), and hese decisions had no iceable e ec s on exchange a es and GDP g ow h in
2005. The g adual inc ease in in e es a es, wi h he a e age eal in e es a e eaching 12.72%,
con ibu ed o a signi ican app ecia ion in he exchange a e, a e aging 16.77%. This
app ecia ion main ained in la ion a 5.7%, which was wi hin he a ge ange.
Howe e , his esul ed in a slowdown in expo and in es men g ow h, consequen ly
a ec ing he GDP, which ended he yea wi h a g ow h a e o 3.2%. The s ong app ecia ion
o he exchange a e did no ha e signi ican e ec s on ne expo s and, he e o e, on agg ega e
demand because o he low GDP g ow h, limi ing he inc ease in impo s (Da Sil a 2017).
F om 2003 o 2006, he economic dynamics in B azil we e cha ac e ized by he need o
con e ge he in la ion ajec o y. In he i s yea o he Lula adminis a ion, in la ion exceeded
he a ge , d i en by he ‘Lula e ec ,’ a e m used o e lec he conce n ha he new
adminis a ion migh abandon he in la ion- a ge ing mone a y policy egime. In esponse o
hese in la iona y p essu es, he au ho i ies aised in e es a es and inc eased he iscal su plus.
F om 2006 onwa ds, in la ion began o con e ge owa ds he es ablished a ge ,
eaching 3.14% ( he a ge a ied be ween 2.5% and 4.5%), compa ed o in 2003, 2004, and
2005, when i eached 9.3% ( a ge 4–2.5%), 7.6% (5.5–2.5%), and 5.7% (4.5–2.5%),
espec i ely. These measu es con ibu ed o s abilizing he in la ion ajec o y and p omo ing
consis ency wi h es ablished a ge s (Ribei o 2017). Consequen ly, he dec ease in in la ion
du ing 2006 and 2007 was he esul o no only cu ency app ecia ion bu also he declines in
he p ices o ag icul u al p oduc s, indi ec axes on ce ain oods, and Con ibu ion o
In e en ion in he Economic Domain (CIDE) on ce ain ypes o uels. Consequen ly, he basic
eal in e es a e could be educed. A he end o 2007, he SELIC a e was 11.25%, and he
eal in e es a e was 1.25% (a e age o 7.25%; Da Sil a 2017).
In Lula’s second e m, he go e nmen aced he e ec s o he 2008 inancial c isis by
adop ing Keynesian policies, aiming o o e come he nega i e e ec s on he coun y gi en he
impac on he global economy. Du ing his pe iod, economic policy was no iceably elaxed,
wi h measu es implemen ed o expand consume and bo owe c edi .
The go e nmen adop ed di ec income ans e p og ams, g an ed eal inc eases in he
minimum wage, launched he G ow h Accele a ion P og am (PAC), and expanded he ole o
he Na ional Bank o Economic and Social De elopmen (BNDES) o s imula e in es men in
he public and p i a e sec o s. Addi ionally, coun e cyclical measu es we e implemen ed
beginning in 2009 o comba he e ec s o he global inancial c isis (Teixei a and Pin o 2012).
Du ing his e m, he go e nmen had mo e leeway wi hin he in la ion- a ge ing sys em,
allowing o a sligh ly mo e expansiona y mone a y policy han in he i s e m. Al hough
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 8
in la ion inc eased, i emained a a ound 4.5%, which was wi hin he ange a ound he a ge
se by COPOM. Compliance wi h in la ion a ge s allowed he Cen al Bank o adop a mo e
lexible app oach o mone a y policy.
Mee ing he in la ion a ge s esul ed in high in e es a es, al hough hese dec eased
conside ably in he second e m. Acco ding o economic o hodoxy, in la ion con ol equi es
he use o a basic in e es a e in an in la ion- a ge ing egime (Da Sil a 2017). Thus, du ing
Lula's second e m (2007–2010), he economic landscape was ma ked by wo signi ican
e en s: he impac o Chinese demand on na ional commodi ies and he 2008 inancial c isis.
Th oughou mos o his pe iod, in la ion emained wi hin he ange es ablished by he
in la ion- a ge ing egime, wi h only a 5.8% in la ion a e in 2010 exceeding he a ge o 4.5%,
wi h a ole ance ange o 2% (Ribei o 2017).
A e he coun e cyclical measu es adop ed in 2009 acili a ed he apid eco e y o he
B azilian economy, he Cen al Bank ini ia ed a new cycle o in e es a e hikes s a ing in Ap il
2010, when in la ion began o ise. The main easons o his mo emen we e ela ed o he
apid g ow h o commodi ies impo ed and expo ed by B azil.
Al hough he SELIC a e expe ienced some luc ua ions, i showed an upwa d end
du ing his pe iod, inc easing om 8.5% in Ap il 2010 o 12.5% in July 2011. A p io i y a he
beginning o he Dilma adminis a ion was o con ain his upwa d mo emen o in la ion,
which eached 6.5% in Ma ch 2011, ma ching he uppe limi o he es ablished a ge (Da
Sil a, 2017).
Du ing Dilma Rousse 's i s e m, economic scena ios we e hea ily in luenced by he
in ensi ied in e na ional inancial c isis. A e he ini ial phase o con ac iona y policies, he
go e nmen selec ed a coun e -c isis app oach, ocusing on educing in e es a es and
p omo ing c edi expansion o in es men s (Ribei o 2017).
Simila o he Lula adminis a ion, he Dilma adminis a ion (2011–2014) aced a
ecu ing dilemma in he B azilian economy: econciling in la ion a ge s wi hou exceeding
he ceiling and while boos ing economic g ow h. F om his pe spec i e, a g adualis s a egy
was adop ed, wi h in e es a e inc eases and mac op uden ial measu es implemen ed. Upon
ealizing ha hese measu es a ec ed g ow h mo e han in la ion, he go e nmen began o
educe in e es a es sys ema ically.
Howe e , in la ion did no allow he sus ained decline in in e es a es o las long. In
la e 2014, aced wi h s agnan economic g ow h, he go e nmen e u ned o a g adualis policy,
aising in e es a es and adjus ing ese e equi emen s o s imula e c edi and, consequen ly,
agg ega e demand. Thus, i esumed an app oach simila o he mone a y policy o he p e ious
go e nmen , cha ac e ized by high in e es a es wi h c edi expansion (Da Sil a 2017).
In Decembe 2014, a he end o Dilma Rousse 's i s e m, annual in la ion eached
6.41%, wi h housing expenses being he mos a ec ed. A he end o 2014, he annual SELIC
a e was 11.75%. Despi e he mone a y policies adop ed du ing Lula's adminis a ion managing
o please bo h bondholde s and indus ial sec o en ep eneu s, Dilma Rousse did no succeed
in s iking his balance and leaned mo e owa ds he in e es s o indus ial en ep eneu s
h ough an economic app oach known as he New Economic Ma ix o he Fiesp Agenda.
Al hough he go e nmen ou lined s a egies ha aimed o inc ease he GDP and educe
in la ion, his a emp was unsuccess ul. Unde in ense p essu e, he impeachmen p ocess
began in Dilma Rousse 's second e m, which was g ounded in allega ions o ‘ iscal
maneu e s’ and was ul ima ely app o ed by he Sena e in 2016 (Viana 2022).
Du ing Michel Teme 's adminis a ion, in la ion con ol eme ged as a p io i y, and a
mone a y policy was implemen ed ha allowed he popula ion's pu chasing powe o eco e .
Teme 's adminis a ion p io i ized in la ion con ol and adop ed a ious measu es, including
he elease o unds om he Se e ance Pay Gua an ee Fund (FGTS). These ac ions we e
implemen ed o s imula e na ional economic eco e y.
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 15
Table A3: He e oskedas ici y Tes ARCH.
F-s a is ic
1.667299
Obs*R-squa ed
8.247285
P ob. F(1,49)
0.1438
P ob. Chi-Squa e(2)
0.1431
Adj. 𝑅
0.03
Du bin-Wa son s a
2.07
Pe iod
2004-2022
Table A4: Mul iple b eakpoin es s
Sequen ial F-s a is ic de e mined b eaks:
1
B eak Tes
F-s a is ic
Scaled
C i ical
F-s a is ic
Value**
0 s. 1 *
4.276651
25.65991
20.08
1 s. 2
1.554433
9.326596
22.11
B eak da es:
Sequen ial
Repa i ion
1
2020M05
2020M05
Bai-Pe on es s o L+1 s. L sequen ially de e mined b eaks; Sample: 2004 2020; B eak es op ions: T imming
0.15, Max. b eaks 5, Sig. le el 0.05; Tes s a is ics employ HAC co a iances (Ba le ke nel, Newey-Wes ixed
bandwid h) assuming common da a dis ibu ion; * Signi ican a he 0.05 le el;
** Bai-Pe on (Econome ic Jou nal, 2003) c i ical alues.
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 16
Table A5:Au oco ela ion es
Au oco ela ion Pa ial Co ela ion AC PAC Q-S a P ob
1 -0.00... -0.00... 0.0192 0.890
2 0.012 0.012 0.0527 0.974
3 0.024 0.024 0.1808 0.981
4 -0.13... -0.13... 4.1929 0.381
5 -0.00... -0.01... 4.2073 0.520
6 0.008 0.011 4.2213 0.647
7 -0.06... -0.05... 5.0686 0.652
8 0.054 0.036 5.7349 0.677
9 -0.05... -0.05... 6.4337 0.696
1... -0.00... -0.00... 6.4430 0.777
1... -0.01... -0.02... 6.4788 0.840
1... -0.11... -0.10... 9.5936 0.652
1... -0.02... -0.03... 9.7332 0.716
1... 0.034 0.031 10.005 0.762
1... 0.046 0.054 10.510 0.786
1... -0.03... -0.07... 10.827 0.820
1... 0.035 0.025 11.109 0.851
1... 0.055 0.062 11.816 0.857
1... 0.023 0.029 11.946 0.888
2... 0.090 0.081 13.876 0.837
2... -0.03... -0.03... 14.088 0.866
2... -0.03... -0.02... 14.398 0.887
2... -0.01... -0.02... 14.450 0.913
2... -0.12... -0.10... 18.128 0.797
2... 0.026 0.013 18.297 0.830
2... -0.04... -0.04... 18.783 0.845
2... 0.012 0.038 18.817 0.877
2... -0.03... -0.08... 19.056 0.896
2... 0.086 0.107 20.901 0.863
3... -0.04... -0.04... 21.450 0.873
3... -0.01... -0.01... 21.531 0.897
3... -0.01... -0.00... 21.565 0.919
3... -0.07... -0.08... 22.974 0.904
3... -0.00... -0.01... 22.985 0.924
3... 0.008 -0.03... 23.002 0.940
3... -0.10... -0.11... 25.765 0.897
D. Alenca , W. Pe ei a, A. Lima, L. Caldas 17
Table A6: VAR Lag O de Selec ion C i e ia
Lag
LogL
LR
FPE
AIC
SC
HQ
0
-4654.908
NA
1.17e+12
44.81643
44.91270
44.85535
1
-2897.479
3396.570
75895.50
28.26422
28.93815*
28.53672*
2
-2848.193
92.41172
66848.66
28.13647
29.38805
28.64254
3
-2808.878
71.44644
64886.98
28.10460
29.93383
28.84425
4
-2772.902
63.30542
65157.77
28.10482
30.51170
29.07804
5
-2737.362
60.48510
65868.27
28.10925
31.09378
29.31604
6
-2707.177
49.63086
70323.28
28.16517
31.72735
29.60553
7
-2657.949
78.10333*
62754.25*
28.03797*
32.17780
29.71190
8
-2630.368
42.16722
69269.88
28.11892
32.83640
30.02643
* indica es lag o de selec ed by he c i e ion LR: sequen ial modi ied LR es s a is ic (each es a 5% le el) FPE: Final
p edic ion e o AIC: Akaike in o ma ion c i e ion SC: Schwa z in o ma ion c i e ion HQ: Hannan-Quinn in o ma ion
c i e ion
Table A7: Coin eg a ion Tes
Da a T end:
None
None
Linea
Linea
Quad a ic
Tes Type
No In e cep
In e cep
In e cep
In e cep
In e cep
No T end
No
T end
No
T end
T end
T end
T ace
3
3
3
3
3
Max-Eig
3
3
3
3
2
No e: Selec ed (0.05 le el*) Numbe o Coin eg a ing Rela ions by Model. *C i ical alues
based on MacKinnon-Haug-Michelis (1999).
