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What Drives Inflation Expectations in Brazil? Public versus Private Information

27 Pages Posted: 3 Feb 2016  

Waldyr Areosa

Banco Central do Brasil; PUC-RJ

Date Written: February 2016

Abstract

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

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

Waldyr Dutra Areosa (Contact Author)

Banco Central do Brasil ( email )

Av. Presidente Vargas, 730 - Centro
Rio de Janeiro, RJ 20071
Brazil

PUC-RJ

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

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