An estimation of the hybrid Phillips curve for Brazil in the inflation targeting regime

Abstract

ResumoO objetivo deste artigo é investigar a dinâmica da inflação no Brasil no período entre 2000-IV e 2014-II, por meio da abordagem da Curva de Phillips híbrida. Essa especificação econométrica permite avaliar os termos forward looking ou expectativa de inflação e backward looking inflação defasada. Os modelos foram estimados pelo método ARDL e os resultados mostraram que a inclusão do custo unitário do trabalho como proxy para a atividade econômica gerou um melhor ajustamento na estimação da Curva de Phillips. A expectativa de inflação tem dominância determinação da dinâmica da inflação brasileira. Há ainda um componente inercial dado pela rigidez de preços proveniente da indexação de contratos e preços administrados.Palavras-chave: Curva de Phillips híbrida, meta de inflação, expectativa de inflação, inércia da inflação. AbstractThe aim of this paper is to investigate the dynamics of inflation in Brazil between 2000-IV to 2014-II, through the hybrid Phillips Curve approach. This econometric specification allows evaluating the forward looking and backward looking terms. The models were estimated by ARDL method and the results showed that the inclusion of unit labor cost as a proxy for economic activity generated a better fit in the estimation of the Phillips curve. The expectation of inflation has dominance in determining the dynamics of the Brazilian inflation. There is still an inertial component given by the rigidity of prices due to the indexation of several contracts and government managed prices.

Unemployment rate and wage growth in Brazil: evidence from a Markov-switching model

“…This paper is related to other studies that sought to investigate the relationship between unemployment and price inflation in Brazil, as Mendonça & Santos (2006), Oliveira & Feijó (2015), Aragon et al (2016), Triches & Feijó (2017) and Oliveira & Feijó (2017). However, the present paper is based on the original relationship proposed by Phillips (1958), thereby directing our research to the interaction between unemployment rate and wage growth, as Bacha & Lima (2004), Campos et al (2010) e Mendonça et al (2012).…”

“…In the same sense, Oliveira & Feijó (2017) showed through an inverse quantile regression (IQR) the rising importance of the role played by expectations in the inflation process in Brazil, thus achieving one of the main goals of the Inflation Targeting Regime: the price formation anchored in the economic agents' expectations. According to Triches & Feijó (2017), studies in this field of research have showed that the role played by the inflation expectation is relevant in inflation dynamics and the BACEN is reacting to changes in this variable. Thus, in the case inflation expectations is well anchored in inflation targeting or in any other macroeconomic indicator, the lagged inflation tends to present low persistence.…”

Macroeconomic Determinants of Unemployment in Brazil: An ARDL Approach

“…The assumption in this case is that if the maximum order of series integration (d max ) is added to the Granger model, it can be applied to the non-stationary series level and provide valid estimates [3]. One can specify the proposed one through the bivariate VAR models (z + d max ) comprised by unemployment and independent variables, according to Equation (6) and Equation (7) below:…”