What Drives Inflation Expectations in Brazil? Public versus Private Information
Banco Central do Brasil; PUC-RJ
BIS Working Paper No. 544
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).
Number of Pages in PDF File: 27
Keywords: incomplete information, public information, coordination, complementarities, externalities
JEL Classification: D82, D83, E31, F31
Date posted: February 3, 2016