Transparency and inflation: What is the effect on the Brazilian economy?

This paper presents empirical evidence concerning the effect of central bank transparency on inflation considering the Brazilian case after the adoption of inflation targeting. Two indices for measuring transparency, based on forward-looking and backwardlooking views, are developed. Furthermore, empirical evidence is divided into three steps: (i) analysis of simple correlation through scatterplot diagrams; (ii) use of VAR models; and (iii) estimation of different specifications of the Phillips curve using OLS and GMM based on the structural model used by the Central Bank of Brazil (CBB). The findings allow one to conjecture that inflation expectations are well coordinated by the CBB. In short, the transparency of information by the CBB is a very important tool for guiding public expectations and thus contributes to maintain inflation under control.