Carlos Eduardo Gonçalves

Inflation Targeting Matters: Evidence from OECD Economies' Sacrifice Ratios

Using data from OECD economies, we show that inflation targeters suffered smaller output losses during disinflations when compared to nontargeters. We also study why some countries choose to inflation target while others do not and find that higher average inflation and smaller debt levels render the adoption of the regime more likely. Applying Heckmans procedure to control for selection bias does not alter the link between inflation targeting and less costly disinflations. Copyright (c) 2009 The Ohio State University.

Monetary policy, default risk and the exchange rate

In a country with high probability of default, higher interest rates may render the currency less attractive if sovereign default is costly. This paper develops that intuition in a simple model and estimates the effect of changes in interest rates on the exchange rate in Brazil using data from the dates surrounding the monetary policy committee meetings and the methodology of identification through heteroskedasticity. Indeed, we find that unexpected increases in interest rates tend to lead the Brazilian currency to depreciate. It follows that granting more independence to a central bank that focus solely on inflation is not always a free-lunch.

Um estudo sobre os impactos da surpresa da política monetária na atividade econômica brasileira

This work studies the impacts of the monetary policy in the real variables of the Brazilian economy. It will be tested the unanticipated movements of the monetary policy in the economic activity and unemployment according whit the Neoclassical and new Keynesians models, which the importance the real variables is the unanticipated component of the monetary policy. As measure of surprise it will be used the error forecast for the interest rate established by the monetary authority.

Exchange Rate Misalignment and Growth: A Myth?

The impact of real exchange rate movements on GDP growth is a hotly debated issue both in policy and academic circles. In this paper we provide evidence suggesting that there is not a robust statistical association between misalignment and growth for a broad panel of countries. Controlling for country fixed effects, time effects and initial GDP, a more depreciated currency is associated with higher growth. However, this positive association vanishes after controlling for the savings rate. We do not find such positive relationship either for large panel of countries or for a subsample of emerging economies.

Determinantes da democracia: novos olhares sobre um velho debate

This paper studies the relationship between political regimes duration and growth using data for 1950-2005. Using econometric duration models to evaluate the so-called Modernization Hypothesis we find evidence supporting the idea that a democracy enjoys longer duration in richest and more educated countries. However, the duration of dictatorships does not seem to be affected by economic growth or the rise of educational attainment.

Fiscal Dominance Upside Down in a Setting of Imperfect Information

In this paper we show, using a simple two-period signalling model in which governments preferences are private information, that: (i) contrary to conventional wisdom, expected inflation may actually decrease as government debt increases, (ii) there is an endogenously determined interval where actual inflation is lower if debt is higher and (iii) in line with the theory of the second best, the presence of asymmetric information concerning the governments degree of inflation aversion may enhance social welfare when it is impossible to precommit to low (zero) inflation.