27 Pages Posted: 3 Feb 2016
Date Written: February 2016
This article applies a noisy information model with strategic interactions à la Morris and Shin (2002) to a panel from the Central Bank of Brazil Market Expectations System to provide evidence of how professional forecasters weight private and public information when building inflation expectations in Brazil. The main results are: (i) forecasters attach more weight to public information than private information because (ii) public information is more precise than private information. Nevertheless, (iii) forecasters overweight private information in order to (iv) differentiate themselves from each other (strategic substitutability).
Keywords: incomplete information, public information, coordination, complementarities, externalities
JEL Classification: D82, D83, E31, F31
Suggested Citation: Suggested Citation
Areosa, Waldyr, What Drives Inflation Expectations in Brazil? Public versus Private Information (February 2016). BIS Working Paper No. 544. Available at SSRN: https://ssrn.com/abstract=2726766