求助,关于Brazils monetary policy 的~~谢谢~~

是 否 +2 论坛币

k人 参与回答

经管之家送您一份

应届毕业生专属福利!

求职就业群

赵安豆老师微信：zhaoandou666

经管之家联合CDA

送您一个全额奖学金名额~ !

立即领取

感谢您参与论坛问题回答

经管之家送您两个论坛币！

+2 论坛币

why did Brazil change its monetary target from the exchange rate to the inflation rate in 1999 and what the success has the Banco Central had in managing the rate of the inflation rate?(2500 words)

想请教大家,我已经写出草稿了,请帮忙看看~~不知道这样会不会跑题呢?

Introduction:

Since 1996, the Brazil has undergone a number of changes. These changes were aimed not only at improving the decision-making process but also reflected changes in Brazil's monetary regime. Brazil implemented a formal inflation-targeting framework for monetary policy in June of 1999. In this paper, I will exam why the Brazil changes its monetary target from the exchange rate to the inflation rate in 1999. Moreover, to illustration what the success has the Banco Central had in managing the rate of the inflation rate.

Main body

The objectives of monetary policy

The ultimate objective of monetary policy is to improve public welfare. This could involve, for example,1) high unemployment ,2)economic growth, 3)price stability ,4) interest-rate stability, 5)stability of financial markets, 6)stability in foreign exchange market (see, e.g., Svensson, 1997).

However, since monetary policy only has systematic effects on a limited number of variables that affect economic welfare it is more appropriate that monetary policy is assigned a limited number of goals. Specifying goals for monetary policy that it can never achieve would, of course, be improductive, and even counterproductive. Instead, monetary policy should be assigned goals that it can achieve and that are consistent with the ultimate objective for economic policy. In order to determine which goals are most suitable for monetary policy, one must therefore understand the effects of monetary policy and what monetary policy can achieve.

In the long term, monetary policy can only control nominal variables such as inflation and the exchange rate. In the long term, monetary policy cannot increase the level of real variables such as GDP and employment, or influence the real exchange rate, i.e. the price of domestic goods and services in terms of foreign goods and services, or the price of nontradable goods and services in terms of tradable goods and services. An unstable monetary policy might, on the contrary, lead to deteriorated resource allocation and possibly to lower growth. In the short and the medium term, a

well-balanced monetary policy can, in addition to controlling the inflation rate and the exchange rate, contribute to stabilising business cycles, although it cannot influence average employment and output in the long term.( Svensson ,1994)

In the short, medium and long term, monetary policy can thus influence inflation. A high and variable inflation rate has adverse effects. It impairs the markets mechanisms’ capacity to achieve efficient resource allocations, and the entailing uncertainty makes it more difficult for consumers to make the right decisions. It leads to arbitrary and inequitable redistributions of incomes and assets, e.g., a shift

away from small savers to professional investors, and from tenants to owners of houses and property. It is sometimes said that “Inflation is a way for the government to steal from small savers and low-income groups”. High inflation has no positive effects and does definitely not lead to higher employment. Instead, the adverse effects eventually become unbearable. To bring inflation down from a high level is costly; as a rule a deep recession with high unemployment is required. Accordingly, it is important to avoid increasing inflation in the first place.

The goals of monetary policy may effect by fiscal policy, government wage and price ceiling, and general economic conditions, as well as by monetary policy (Campbell C.D. & Campbell R., 1981). Moreover, the effectiveness of monetary policy must be judged by relating techniques to policy objective it is necessary to specify these goals access effectiveness (Hodgman D.R., 1974).

Since 1996, The Central Bank of Brazil's (BCB) Monetary Policy Committee (COPOM) composition and objectives, and the frequency of its meetings, has undergone a number of changes. After moving to a floating exchange rate system, the government defined inflation targets for the coming years and assigned to the Central Bank the responsibility and the operational independence to conduct monetary policy in order to meet the inflation objective in 1999. Inflation targeting requires that monetary authorities adopt a forward-looking attitude and take pre-emptive action, given the lags between policy decisions and their effect on output and prices. The inflation target central real bank actually inflation forecast targeting. Rather than reacting to present facts, monetary policymakers make decisions based on conditional forecasts of future inflation, conditional on alternative interest rate paths and on the best estimate of the current state of the economy and the probable future development of exogenous variables (Bogdanski J.,Tombini A. &Sérgio Ribeiro da Costa Werlang, n.d.)

The changes of monetary policy are response to recent key developments in the Brazilian economy.

The background of Brazil’ financial crisis

As Mishkin F.S. (2006) said the problems with the exchange-rate targeting is that with capital mobility that targeting country no longer can pursue its own independent monetary policy and so loses its ability to monetary policy to respond to domestic shocks that are independent of those hitting the anchor country. Moreover, an exchange rate target means that shocks to the anchor country are directly transmitted to the targeting country, because changes in interest rates in the anchor country lead to a corresponding change in interests in the targeting country (Mishkin F.S., 2006). A second problem with the exchange-rate targets is that they leave countries open to speculative attacks on their currencies (Mishkin F.S., 2006). Lastly , exchange-rate targeting is that it can weaken the accountability of policymakers, particularly in emerging maker countries (Mishkin F.S., 2006).

In early 1999,the Brazil's financial crisis included both fiscal and balance of payments weaknesses。In mid-1998, Brazil's consolidated fiscal position was showing a primary deficit as the government's expenditures, excluding interest payments, exceeded its income. The current account deficit was approaching 5 percent of GDP, even as the economy was sliding into recession. Then, as often happens to vulnerable countries, an economic crisis erupted: after Russia defaulted on its debt in August, capital flows to Brazil came to a halt.

These events forced Brazil to float the real and led to a panic in January 1999. In February, the real plummeted to 2.15 to the dollar, from 1.20 at the beginning of the year. Brazil could soon have found itself in all kinds of trouble. A panicky reaction to the devaluation could have created serious imbalances, fueling inflation while driving the economy into a deep recession. Inflation is harmful to economic activity and public welfare (Pétursson ,2000b).

The threat of inflation was particularly relevant, given Brazil's history; observers predicted inflation rates ranging from 30 percent to 80 percent. Forecasts for GDP growth in 1999 ranged from -3 percent to -6 percent.

At first, Brazil thought to go back to a managed fixed-rate regime, or whether to float. Because of the standard optimum currency-area, it made sense to allow the real to continue to float. As a result, it needed to find a new nominal anchor. A policy based on a monetary aggregate did not seem feasible, particularly considering the uncertainties inherent in the crisis sweeping through the Brazilian economy. In other way, Brazil might think to adopt a fully discretionary policy without an explicit anchor. However, it cause the degree of instability expected, a stronger and more transparent commitment was essential. To address this need, Brazil opted for a full-fledged inflation-targeting framework.

The inflation-rate target have several advantages can solve the Brazil’s problems.

1. An inflation forecast has the highest correlation with actual future inflation. This is contingent upon its being constructed on basis of all relevant information. Naturally, this does not mean that the forecast is flawless, but that the errors are as small as economic analysis allows (Svensson, 1997).

2. Inflation target provides automatic business cycle stabilization for demand disturbances. A rise in demand leads to a higher inflation forecast, with an associated tightening of monetary policy, and vice-versa. This is particularly important in the case of a contraction in demand and a tendency towards deflation. It is important to recognize that an inflation target, if achieved, is a guarantee not only against excessive inflation but also against deflation, especially as the inflation target is normally set a few percentage points above zero. With an inflation target it may, at first, seem difficult to observe the extent to which the target is fulfilled, since one has to wait 6-8 quarters before seeing the result of the present monetary policy. But what is relevant is to observe the intermediate target, i.e. the inflation forecast. This is not very difficult for the general public and the market, provided that the central bank openly reports its analyses and forecasts. Central banks which operate an inflation target actually publish inflation reports on a regular basis (Svensson, 1997).

3. The principles of monetary policy are easily understood, i.e. that monetary policy must be tightened when the forecast exceeds the inflation target and eased when it is below the target. The relationship between the intermediate target (the forecast) and the ultimate goal (future inflation) becomes very clear and almost trivial. The discussion of monetary policy naturally becomes very goal-oriented (Svensson, 1997).

Svensson, Sep., 1997, “Exchange rate target or inflation target for Norway?”

Thus, In March 1999, Brazil announced (1) that our goal was to bring inflation down to a single-digit annualized rate by the last quarter of 1999 and (2) that we would have the full inflation-targeting system in place by the end of June. The year-end target served as a temporary anchor, which contributed to the effort to contain the panic.

The good news at that point was that, in the six months before the crisis, a remarkable turnaround in fiscal policy had taken place. Between October and February, quite a few policy changes had been implemented in Brazil. The path was not smooth; some important measures were defeated in congress and had to be reintroduced later. But, in the end, Brazil succeeded in moving from a primary deficit of 1 percent of GDP in 1997 to a running surplus of 3 percent of GDP in late 1998 and into 1999. That was key. Without a primary surplus, concerns about the future path of the debt-to-GDP ratio would have continued to grow.

After introduce the inflation rate in Brazil, The exchange rate stabilized and fell below 2 reais to the dollar very quickly. Inflation expectations also came down, which allowed us to use the interest-rate bias twice during March 1999; rates were first cut to 42 percent, then to 39½ percent. Synthetic on-shore dollar rates fell dramatically, from the teens and even the twenties to mid-single-digit levels not much above international rates. During the months that followed, Brazil were able gradually to lengthen the maturities of the government's domestic debt, from six months to about a year. By June 1999, the panic was behind us.

The Brazilian economy has weathered the crisis well. Despite a series of internal and external shocks since June, the exchange rate has floated with very limited central bank intervention. The interventions are announced at the end of the day.

Figure 1. Inflation Rates in Brazil (1995-2005)

Source: Central Bank of Brazil

Notes: IPA-DI (Wholesale Price Index); IGP-M (General Price Index); IPC (Consumer Price Index) and IPCA (Broad Consumer Price Index).

http://www.ppge.ufrgs.br/anpecsul2005/artigos/area2-09.pdf

According to figure 1, the inflation rates variances are extraordinarily high even in this sample (1995-2005) of the recent history of price stabilization. During this period of time, the annual inflation rates averaged between 8.01 and 13.9 per cent and their variances measured by standard deviation varied from 5.3 to 10.2 per cent, in IPCA (Broad Consumer Price Index) and IPA (Wholesale Price Index), respectively.

On the external side, the current account deficit decreased from $33 billion to $24 billion in 1999, being totally financed by record inflows of $30 billion in foreign direct investment. Despite depressed commodities prices, exports are expected to make a robust recovery in 2000, as a result of improved Brazilian competitiveness and a more favorable international scenario. Brazil's trade balance could reach a surplus of nearly $4 billion in 2000, even with an expected increase in imports.

The implementation of inflation targeting in Brazil is off to a promising start. The adoption by the IMF, for the first time, of a consultation mechanism on inflation targets, in the last revision of the program, stresses the soundness of our current monetary policy.

On the micro side, a major overhaul of the regulatory aspects of the money market and of the domestic government debt market has just been completed. Financial repression is also being greatly reduced. The plan is to reduce the volume of directed credit as well as reserve requirements so as to improve microeconomic efficiency and also to enhance the transmission mechanism of monetary policy. The capital account of the balance of payments is being liberalized. For this year, we will place a new focus on capital markets reform, including improved transparency rules and minority shareholder protection. These policies are being supplemented by the adoption of stronger prudential measures that include a revision of the payments system and improved bank supervision and regulation. These microeconomic reforms will support Brazil's inflation targeting cum flexible exchange rate system.

[此贴子已经被作者于2006-3-19 6:47:45编辑过]

扫码加我 拉你入群

请注明：姓名-公司-职位

以便审核进群资格，未注明则拒绝

分享0 收藏0 回帖

关键词：Monetary Brazils Policy Brazil ETA 求助 Policy Monetary Brazils