Real Time Leading Indicators of the Brazilian Inflation

UC Riverside Economics Working Paper

40 Pages Posted: 6 Feb 2001

See all articles by Marcelle Chauvet

Marcelle Chauvet

University of California Riverside

Date Written: September 2000


The goal of this paper is to construct leading indicators that anticipate inflation cycle turning points on a real time monitoring basis. As a first step, turning points of the IPCA inflation are determined using a periodic stochastic Markov switching model. These turning points are the event timing that the leading indicators should anticipate. A dynamic factor model is then used to extract common cyclical movements in a set of variables that display predictive content for inflation. The leading indicators are designed to serve as practical tools to assist real-time monitoring of monetary policy on a month-to-month basis. Thus, the indicators are built and ranked according to their out-of-sample forecasting performance. The leading indicators are found to be an informative tool for signaling future phases of the inflation cycle out-of-sample, even in real time when only preliminary and unrevised data are available.

Keywords: leading indicators, inflation targeting, real time forecasting, Brazil, event timing forecasts

JEL Classification: C32, C53, E31, E37, E52, E58, N16

Suggested Citation

Chauvet, Marcelle, Real Time Leading Indicators of the Brazilian Inflation (September 2000). UC Riverside Economics Working Paper. Available at SSRN: or

Marcelle Chauvet (Contact Author)

University of California Riverside ( email )

900 University Avenue
4136 Sproul Hall
Riverside, CA 92521
United States
(951) 827-1587 (Phone)

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