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Leading Indicators of Inflation for Brazil

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Author Info

  • Marcelle Chauvet

Abstract

The goal of this project is to construct leading indicators that anticipate inflation cycle turning points on a real time monitoring basis. As a first step, turning points of the IPCA inflation are determined using a periodic stochastic Markov switching model. These turning points are the event timing that the leading indicators should anticipate. A dynamic factor model is then used to extract common cyclical movements in a set of variables that display predictive content for inflation. The leading indicators are designed to serve as practical tools to assist real-time monitoring of monetary policy on a month-to-month basis. Thus, the indicators are built and ranked according to their out-of-sample forecasting performance. The leading indicators are found to be an informative tool for signaling future phases of the inflation cycle out-of-sample, even in real time when only preliminary and unrevised data are available.

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File URL: http://www.bcb.gov.br/pec/wps/ingl/wps07.pdf
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Bibliographic Info

Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 7.

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Date of creation: Sep 2000
Date of revision:
Handle: RePEc:bcb:wpaper:7

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Web page: http://www.bcb.gov.br/?english

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Cited by:
  1. Daniel Leigh & Marco Rossi, 2002. "Leading Indicators of Growth and Inflation in Turkey," IMF Working Papers 02/231, International Monetary Fund.
  2. Leonardo Soriano de Alencar & Márcio I. Nakane, 2004. "Bank Competition, Agency Costs and the Performance of the Monetary Policy," Working Papers Series 81, Central Bank of Brazil, Research Department.
  3. Arminio Fraga & Ilan Goldfajn & Andre Minella, 2003. "Inflation Targeting in Emerging Market Economies," NBER Working Papers 10019, National Bureau of Economic Research, Inc.
  4. Aloisio Araujo & Marcia Leon, 2004. "Speculative Attacks on Debts and Optimum Currency Area: A Welfare Analysis," Working Papers Series 84, Central Bank of Brazil, Research Department.
  5. Minella, Andre & de Freitas, Paulo Springer & Goldfajn, Ilan & Muinhos, Marcelo Kfoury, 2003. "Inflation targeting in Brazil: constructing credibility under exchange rate volatility," Journal of International Money and Finance, Elsevier, vol. 22(7), pages 1015-1040, December.
  6. Benjamin Miranda Tabak, 2003. "On the Information Content of Oil Future Prices," Working Papers Series 65, Central Bank of Brazil, Research Department.
  7. Leonardo Soriano de Alencar & Márcio I. Nakane, 2003. "Real Balances in the Utility Function: Evidence for Brazil," Working Papers Series 68, Central Bank of Brazil, Research Department.
  8. Charles Lima De Almeida & Marco AureLIO Peres & Geraldo Da Silva & E. Souza & Benjamin Miranda Tabak, 2003. "Optimal monetary rules: the case of Brazil," Applied Economics Letters, Taylor and Francis Journals, vol. 10(5), pages 299-302.
  9. Chrigui Zouhair & Boujelbene Younes, 2009. "The Opportunities for Adopting Inflation Targeting in Tunisia: a Cointegration Study and Transmission Channels of Monetary Policy," Transition Studies Review, Springer, vol. 16(3), pages 671-692, October.
  10. Tarsila Segalla Afanasieff & Priscilla Maria Villa Lhacer & Márcio I. Nakane, 2002. "The Determinants of Bank Interest Spread in Brazil," Working Papers Series 46, Central Bank of Brazil, Research Department.
  11. André Soares Loureiro & Fernando de Holanda Barbosa, 2004. "Risk Premia for Emerging Markets Bonds: Evidence from Brazilian Government Debt, 1996-2002," Working Papers Series 85, Central Bank of Brazil, Research Department.
  12. Marcelo Kfoury Muinhos & Márcio I. Nakane, 2006. "Comparing equilibrium real interest rates: different approaches to measure Brazilian rates," Working Papers Series 101, Central Bank of Brazil, Research Department.
  13. Eui Jung Chang & Marcelo Kfoury Muinhos & Joanílio Rodolpho Teixeira, 2002. "Macroeconomic Coordination and Inflation Targeting in a Two-Country Model," Working Papers Series 50, Central Bank of Brazil, Research Department.
  14. Victorio Yi Tson Chu, 2002. "Credit Channel with Sovereign Credit Risk: an Empirical Test," Working Papers Series 51, Central Bank of Brazil, Research Department.
  15. Pedro Fachada, 2001. "Inflation Targeting in Brazil: Reviewing Two Years of Monetary Policy 1999/00," Working Papers Series 25, Central Bank of Brazil, Research Department.
  16. Paulo Coutinho & Benjamin Miranda Tabak, 2002. "Delegated Portfolio Management," Working Papers Series 60, Central Bank of Brazil, Research Department.
  17. Benjamin Miranda Tabak, 2003. "Monetary Policy Surprises and the Brazilian Term Structure of Interest Rates," Working Papers Series 70, Central Bank of Brazil, Research Department.
  18. Benjamin Miranda Tabak & Solange Maria Guerra, 2002. "Stock Returns and Volatility," Working Papers Series 54, Central Bank of Brazil, Research Department.

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