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What Drives Inflation Expectations in Brazil? An Empirical Analysis

Author/Editor: Cerisola, Martin | Gelos, Gaston
Authorized for Distribution: June 1, 2005
Electronic Access: Free Full Text (PDF file size is 475KB)
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: This study examines the macroeconomic determinants of survey inflation expectations in Brazil since the adoption of inflation targeting in 1999. The results suggest that the inflation targeting framework has helped anchor expectations, with the dispersion of inflation expectations declining considerably, particularly during periods of high uncertainty. We also find that apart from the inflation target, the stance of fiscal policy, as proxied by the ratio of the consolidated primary surplus to GDP, has been instrumental in shaping expectations. The importance of past inflation in determining expectations appears to be relatively low, and the overall empirical evidence does not suggest the presence of substantial inertia in the inflation process.
 
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Series: Working Paper No. 05/109
Subject(s): Inflation | Brazil | Inflation targeting | Economic models
Author's keyword(s): Inflation | inflation expectations | inflation targeting | Brazil
 
English  
    Published:   June 1, 2005        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA2005109   Pages:   22
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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