Interest rate, exchange rate and the system of inflation target in Brazil. In the consensus view of the Brazilian system of inflation targeting, the core of inflation is due to demand shocks; the rate of interest is set to control demand; and some variation in the exchange rate happens as...

We examine the relationship between international reserves variation and the exchange rate and interest rate movements for the past years of the Brazilian economy. The empirical evidence obtained for the international reserves variation captures the distinction between the two exchange rate...