Inflation Dynamics in Latin America

Abstract

La serie de Documentos de Investigación del Banco de México divulga resultados preliminares de trabajos de investigación económica realizados en el Banco de México con la finalidad de propiciar el intercambio y debate de ideas. El contenido de los Documentos de Investigación, así como las conclusiones que de ellos se derivan, son responsabilidad exclusiva de los autores y no reflejan necesariamente las del Banco de México.The Working Papers series of Banco de México disseminates preliminary results of economic research conducted at Banco de México in order to promote the exchange and debate of ideas. The views and conclusions presented in the Working Papers are exclusively the responsibility of the authors and do not necessarily reflect those of Banco de México. 2006-11 2006-11 Inflation Dynamics in Latin America Documento de Investigación Working Paper AbstractWe analyze inflation's persistence in the 1980-2006 period for the ten largest Latin American economies using univariate time-series techniques. Although the estimated degree of inflation persistence appears to be different across countries, for the region as a whole the persistence seems to be very high. However, the estimated degree of persistence falls in all countries once we permit structural breaks in the mean of inflation. The timing of these breaks coincides with shifts in the monetary policy regimes and is similar across countries. Regardless of the changes in the mean, the degree of persistence appears to be decreasing in the region, even though for some countries persistence does not seem to be changing. Keywords: Inflation, Inflation Persistence, Latin America, Monetary Policy, Multiple Breaks, Time Series. JEL Classification: E31, E42, C22Resumen Analizamos la persistencia de la inflación en el periodo 1980-2006 para los diez países más grandes de América Latina utilizando técnicas de series de tiempo univariadas. A pesar de que el grado de persistencia estimado parece ser diferente entre países, para la región en general la persistencia parece ser muy alta. Sin embargo, el grado de persistencia estimado disminuye en todos los países si controlamos por cambios estructurales en la media de la inflación. Las fechas de estos cambios estructurales coinciden con cambios en los regímenes de política monetaria y son similares entre países. Sin importar los cambios en la media, el grado de persistencia parece estar disminuyendo en la región, a pesar de que en algunos países la persistencia no parece estar cambiando.

What Affects the Relationships between Oil and Industrial Sector? Case of Eurozone

“…This process continues until to the m breaks and, the dates and the number of the structural break of the model which has the minimum t statistic is taken (Capistrán & Ramos-Francia, 2009). The critical values that are needed to test the null unit root hypothesis are given at Table 1 in the study of Kapetanios (2005).…”

Multiple Structural Breaks and Inflation Persistence: Evidence fromChina

“…In contrast, more than one shift of persistence was found when applying Bai–Perron tests for multiple breaks even for the same countries over similar sample periods, and the persistence decreased as a whole, with a remarkable fluctuation in the level when these shifts were taken into account (e.g. Capistrán and Ramos‐Francia () for Mexico and Brazil, and Önder () for Turkey).…”

“…Similarly, it is also found that the adoption of IT leads to a fall in inflation persistence for Brazil, Mexico and the 10 largest Latin American economies (Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Peru, Uruguay and Venezuela) in Chan and Matos (), Chiquiar et al . () and Capistrán and Ramos‐Francia ().…”

Policy Response to External Shocks: Lessons from the Crisis

“…6 Otherwise, these institutions may lose the credibility gained by their favorable track record in the last decades.…”