Perfect and Imperfect Credibility: A Brazilian Target Zone Analysis

42 Pages Posted: 14 Dec 2000

See all articles by Rosa Fontes

Rosa Fontes

Universidade Federal de Vicosa

Marcelo A. Arbex

University of Illinois at Urbana-Champaign - Department of Economics

Mirian Almeida

FADIVALE

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Abstract

This paper empirically investigates the credibility of the Brazilian exchange rate target zone implemented from March 10, 1995 to January 15, 1999 using the drift-adjustment method developed by Bertola and Svensson (1993). The model estimation does not accept the perfect credibility hypothesis, although it shows some evidence of imperfect credibility. The Brazilian interest rate differential does not capture the expected Brazilian currency devaluation, which is similar to the Chilean, Israelian and Mexican exchange rate target zones results.

Note: The downloadable paper is written in Portuguese.

JEL Classification: E42,E51

Suggested Citation

Olivera Fontes, Maria Rosa and Arbex, Marcelo A. and Almeida, Mirian, Perfect and Imperfect Credibility: A Brazilian Target Zone Analysis. Available at SSRN: https://ssrn.com/abstract=234881 or http://dx.doi.org/10.2139/ssrn.234881

Maria Rosa Olivera Fontes (Contact Author)

Universidade Federal de Vicosa ( email )

Avenida P. H. Rolfs s/n, Campus UFV
Departamento de Economia
Vicosa, MG 36571-000
Brazil
+55 31 899-2455 (Phone)
+55 31 899-2773 (Fax)

Marcelo A. Arbex

University of Illinois at Urbana-Champaign - Department of Economics ( email )

601 E John St
Champaign, IL Champaign 61820
United States

Mirian Almeida

FADIVALE ( email )

Rua Primeiro de Maio, 526
Nossa Senhora das Gracias Departamento de Economia
Governador Valadares, MG 35058-250
Brazil
(5533)276-1105 (Phone)

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