By the Kalman filter and a Vector Autoregressive (VAR) analysis for the recent Brazilian economy, this work aims at assessing empirical evidences on relationships between expected inflation, observed inflation and the Central Bank's credibility. It is found that an inflation positive shock...

Inflation in advanced economies is low by historical standards but there is no threat of deflation. Slower economic growth is caused by supply-side constraints rather than low inflation. Below-the-target inflation does not damage the reputation of central banks. Thus, central banks should not...