Mateus Boldrine Abrita

Despite the rigidity that characterizes the Brazilian monetary policy, represented mainly by high interest rates, inflation in Brazil is still above the global average, although the unequivocal success of the “Plano Real” and Inflation Targeting Regime (hereafter ITR), in controlling inflation between 1995 and 2011. This observation provides evidence that the Brazilian economy has specificities that some dominant theories about inflation do not consider. Policies guided exclusively by these analyzes, can result in unnecessary sacrifices for the economy. Therefore, this research analyzes the problem of inflation in Brazil after ITR, with the objective of identify the main elements that cause and accelerates of the price level, under the assumption that other factors such as shock costs and inertial component are more important than demand pressures, to explain the problem. Intended for this, initially, will be investigated theories that highlight the main causes of inflation in the different schools of economic thought, whether of demand, supply or inertial. Following, chapter II presents an analytical study of the main indexes of inflation in Brazil, giving particular attention to IPCA, in the last decade, and their groups, subgroups and major disaggregations, with the purpose to check which components most influenced the price levels. Thereby, the movements of the IPCA and it’s components are more representative of what happened with Brazilian inflation in the 2000s, in other words, administered prices had a key role in the behavior of inflation, especially in the first half of the decade, after this period, the group “food” begins to push up prices more significantly. Subsequently, chapter III seeks to add the remaining analyzes, further evidence to the study, in order to point out the main factors causing inflation in Brazil. Using an econometric instrumental of a Structural Vector Autoregression SVAR model, aiming to calculate empirically the determinants of the full IPCA index, and it’s decompositions between market and administered prices. The econometric approach corroborates the conclusion drawn in chapter II, which verified that the Brazilian inflation suffered a significant pressure by the administered prices and from the “food” group. Not showing that Brazilian´s inflation is caused by demand. Through the analysis of the Variance Decomposition, it was observed that the IPCA is determined primarily by its own variance, besides the exchange rate and to a lesser level, but significant, the price of commodities. Freely prices (defined by the supply/demand system) and administer (prices controlled by the government) follow the same logic, giving particular attention to the strong inertial feature presented by administered prices. The evidence presented in chapter III show that the inertia, external factors and supply conditions overlap the demand in order to determine the inflation. So if inflation shows little sensitivity to the level of activity, and the policy measures to control inflation based solely on demand may present themselves inefficient and ineffective when compared with alternative measures. Finally, chapter IV has as objectives to propose action more in line with the inflationary reality of the Brazilian economy, seeking to reverse the inflationary pressures more characteristics of the period, therefore consequently, external sector and exchange rate, inertia and indexing, commodity and food inflation;