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Helder Ferreira de Mendonça and Roseli da Silva
''Observing the influence of fiscal credibility on inflation: Evidence from an emerging economy''
( 2016, Vol. 36 No.4 )
This study investigates empirically how the fiscal credibility affects the inflation rate in an emerging economy under inflation target. Based on the Brazilian experience, a fiscal credibility index is built taking into account how the market expectations are anchored to the primary surplus target. The main idea is that a government that is able to anchor expectations around the target (case of high credibility) may reduce inflation. The findings provide empirical evidence that the success of government in achieving the fiscal primary surplus target (gain of credibility) is an important ally to reduce inflation rate and its expectations.
Keywords: fiscal credibility, inflation, primary surplus, inflation targeting
JEL: E6 - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General
E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
Manuscript Received : Oct 18 2016 Manuscript Accepted : Dec 02 2016

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