INFLATION TARGETING REGIME: COMPARATIVE ANALYSIS AND EMPIRICAL EVIDENCE FOR SELECTED EMERGING COUNTRIES

ABSTRACT

The objective of this paper is to analyze the inflation targeting regime (ITR) in Brazil in the light of the experiences of other selected emerging countries, namely: South Africa, Chile, Colombia, South Korea and Mexico. To that end, there is an exposition of the contexts in which ITR was adopted in the selected countries, as well as a comparison between the arrangements of these regimes, to distinguish its main features. Lastly, an autoregressive model is estimated with vector error correction (VEC) for each country in the sample, in order to set the conditions for an analysis of the efficiency of ITR in these economies. The empirical results of the research suggest that the most flexible inflation targeting regimes (South Africa, Chile, Colombia, South Korea) are relatively more efficient in terms of curbing inflation than more rigid regimes (Brazil and Mexico).

KEYWORDS: inflation; inflation targeting; VEC model.