"Studying the recent experience of Brazil the paper explains how default risk is at the centre of the mechanism through … which an emerging market central bank that targets inflation might lose control of inflation--in other words of the … perverse effect on inflation. We show that the presence of default risk reinforces the possibility that a vicious circle might …

slippage is not negligible. For countries with low inflation, the relationship between average inflation and the growth rate of … implied elasticities, helps explain the slippage. For the period since 1990, inflation targeting at low rates of inflation … makes it harder to establish the long run relationship between monetary growth and inflation"--National Bureau of Economic …