What Drives Inflation Expectations in Brazil? An Empirical Analysis

June 1, 2005

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Format: Chicago

Martin D. Cerisola, and Gaston Gelos. What Drives Inflation Expectations in Brazil? An Empirical Analysis, (USA: International Monetary Fund, 2005) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This study examines the macroeconomic determinants of survey inflation expectations in Brazil since the adoption of inflation targeting in 1999. The results suggest that the inflation targeting framework has helped anchor expectations, with the dispersion of inflation expectations declining considerably, particularly during periods of high uncertainty. We also find that apart from the inflation target, the stance of fiscal policy, as proxied by the ratio of the consolidated primary surplus to GDP, has been instrumental in shaping expectations. The importance of past inflation in determining expectations appears to be relatively low, and the overall empirical evidence does not suggest the presence of substantial inertia in the inflation process.

Subject: Fiscal policy, Inflation, Inflation targeting, Price controls, Real effective exchange rates

Keywords: Central bank, Inflation expectation, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/109
Stock No:

WPIEA2005109
ISBN:

9781451861280
ISSN:

1018-5941

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