Macroeconomic Determinants of Investment under Inflation Targeting: Empirical Evidence from the Brazilian Economy

The use of interest rate as the main tool by which central banks implement inflation targets points to a strong link between private investment decisions and monetary policy. With the objective of contributing to the literature surrounding macroeconomic determinants of investment under inflation targeting, an empirical analysis through Generalized Method of Moments models for the Brazilian case is made. In a general way, the findings underscore the relevance of macroeconomic variables for the determination of investment. In particular, we find that success inflation targeting creates a stable macroeconomic environment that promotes private investment.