What Drives Inflation Expectations in Brazil?: An Empirical Analysis

23 Pages Posted: 3 Mar 2006

See all articles by Martin D. Cerisola

Martin D. Cerisola

International Monetary Fund (IMF)

Gaston Gelos

Bank for International Settlements; Centre for Economic Policy Research (CEPR)

Date Written: June 2005

Abstract

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.

Keywords: Inflation, inflation expectations, inflation targeting, Brazil

JEL Classification: E52, F41, E61, E65

Suggested Citation

Cerisola, Martin D. and Gelos, R. Gaston, What Drives Inflation Expectations in Brazil?: An Empirical Analysis (June 2005). IMF Working Paper No. 05/109, Available at SSRN: https://ssrn.com/abstract=887978

Martin D. Cerisola (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

R. Gaston Gelos

Bank for International Settlements ( email )

Centralbankplatz 2
Basel, 4002
Switzerland
0612808201 (Phone)

HOME PAGE: http://https://www.bis.org/author/gaston_gelos.htm

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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