Government Tool and Goal Achievement

Abstract

The achievement of goals established for public policies depends, among other factors, on the adoption of the right instrument for the implementation of the policy. The inflation control policy in Brazil has been using the short-term interest rate, Selic, as an instrument, among others, for the regulation of price stability. Therefore, this policy’s instrument through government of distinct ideological nuences in Brazil, showing itself a consolidad strategy of public policy instrumento f price statilization. However, does the basic interest policy practiced by the Central Bank of Brazil have effects on the inflation rate? This article attempts to answear this question using statistical modeling of vector autoregressive (VAR), for a time series that covers the period from June/1999 to December/2019. Nonetheless, one does not find empirical evidence of the effectiveness of the Selic rate as instrument for reduce the inflation in Brazil. In addition, models with inflation and rate of change as variables are estimated, in order to entertain with the possibility of other macroeconomic stabilization tools. The results favor the thesis that the exchange rate can serve as a price stabilizer.