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This paper aims at testing the validity of the inflation stickiness and the Rational Expectation Hypothesis in the context of the Blanchard and Kahn (1980) approach, for the Brazilian economy, during the period from 1994 to 2003. Using the Fuhrer-Moore model and GMM, we find evidence favoring both hypotheses. We also find evidence, from the demand equation, that the recessive effect due to the increase in the real interest rate is smaller than the expansive effect due to the devaluation of the domestic currency. From the supply equation, we find that the trade-off between unemployment and inflation holds while the passthrough effect shows low influence on the inflation rate. [ABSTRACT FROM AUTHOR]

Within a dynamic programming approach, an optimal rule for the central bank to attain its inflation targeting goals is derived. The Short-run nominal interest rate is used as an instrument to achieve monetary objectives. The model is tested for the Brazilian economy and compared with results found for other countries. Evidence for the estimated feedback interest rule for the Central Bank suggests that the cost of reducing inflation in an open economy is lower than that of a closed economy. [ABSTRACT FROM AUTHOR]

The purpose of this article is to assess the intensity of the linear association between the conditional volatility of stock market returns in Brazil and the conditional volatility of macro-economic variables of interest, specifically, the current account deficit, the industrial production, the money supply, the exchange rate and the interest rate. To this end we fit a multivariate SUR model. The conclusion is that, in level, the determinants of the conditional variance of the IBOVESPA are the components of conditional variance of the interest rate and money supply, showing a direct contemporaneous relations, and, showing inverse relations, the conditional variances of inflation and industrial production. There is no empirical evidence of influence of the conditional variances of the exchange market and the current account deficit. [ABSTRACT FROM AUTHOR]