Monetary Policy and Inflation Expectations in Latin America : Long-run Effects and Volatility Spillovers
Organisation for Economic Co-operation and Development
The current monetary policy framework in several Latin American countries, combining inflation targeting and a floating exchange-rate regime, has contributed to disinflation by anchoring expectations around low, stable levels. This paper uses co-integration analysis to estimate simultaneously a monetary reaction function and the determinants of expected inflation for Brazil, Chile, Colombia and Mexico in the post-1999 period. It also tests for the presence of volatility spillovers between the monetary stance and inflation expectations based on M-GARCH modelling. The results of the empirical analysis show that: i) there are long-term relationships between the interest rate, expected inflation and the inflation target, suggesting that monetary policy has been conducted in a forward-looking manner and helped anchor inflation expectations in the countries under examination, and ii) greater volatility in the monetary stance leads to higher volatility in expected inflation in Brazil, Colombia and Mexico, suggesting that interest-rate smoothing contributes to reducing inflation expectations volatility. No volatility spillover effect was detected in the case of Chile.
Year of publication: |
2006
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Institutions: | Organisation for Economic Co-operation and Development (contributor) |
Publisher: |
Paris : OECD Publishing |
Subject: | Geldpolitik | Monetary policy | Lateinamerika | Latin America | Inflationserwartung | Inflation expectations | Volatilität | Volatility | Mexiko | Mexico | Chile | Brasilien | Brazil | Kolumbien | Colombia | Inflationssteuerung | Inflation targeting | Flexibler Wechselkurs | Flexible exchange rate |
Saved in:
Online Resource
Extent: | 27 p. 21 x 29.7cm |
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Series: | |
Type of publication: | Book / Working Paper |
Language: | English |
Other identifiers: | 10.1787/416820683181 [DOI] |
Classification: | E52 - Monetary Policy (Targets, Instruments, and Effects) ; C22 - Time-Series Models ; O54 - Latin America; Caribbean |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10012446842
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