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Firm Inflation Expectations and Monetary Policy in Uruguay

Author

Listed:
  • Gerardo Licandro

    (Banco Central del Uruguay)

  • Miguel Mello

    (Banco Central del Uruguay)

Abstract

Using a novel monthly survey of firm inflation expectations for Uruguay from October 2009 to June 2013, this paper studies the impact of monetary policy on inflation expectations at the micro level. Using several panel data techniques we consistently find a negative and statistically significant relationship between monetary policy and inflation expectations. We also find a high level of inertia in expectations. Past inflation changes have a positive impact on inflation expectations, while exchange rate changes have a significant but low importance on expectations. We observe a negative link between inflation expectations and expected economic activity, potentially due to past experiences of a monetary financing of crisis. Contrary to intuition, there is no clear link between firm inflation expectations and the median assessment of experts published by the Central Bank.

Suggested Citation

  • Gerardo Licandro & Miguel Mello, 2014. "Firm Inflation Expectations and Monetary Policy in Uruguay," Documentos de trabajo 2014006, Banco Central del Uruguay.
    • Handle: RePEc:bku:doctra:2014006
    as

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    File URL: https://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/6.2014.pdf
    File Function: First version, 2014
    Download Restriction: no
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    Citations

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    Cited by:

    1. Serafín Frache & Rodrigo Lluberas, 2017. "New information and inflation expectations among firms," Documentos de trabajo 2017013, Banco Central del Uruguay.
    2. Miguel Mello & Jorge Ponce, 2020. "Fiscal policy and inflation expectations," Documentos de trabajo 2020004, Banco Central del Uruguay.
    3. Fernando Borraz & Laura Zacheo, 2018. "Inattention, Disagreement and Internal (In)Consistency of Inflation Forecasts," Documentos de trabajo 2018007, Banco Central del Uruguay.
    4. Fernando Borraz & Miguel Mello, 2020. "Communication, Information and Inflation Expectations," Documentos de trabajo 2020005, Banco Central del Uruguay.
    5. Diego Labat & Gerardo Licandro, 2021. "Towards a quality currency," Documentos de trabajo 2021005, Banco Central del Uruguay.

    More about this item

    Keywords

    Monetary transmission; inflation expectations; expectations channel;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C82 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L70 - Industrial Organization - - Industry Studies: Primary Products and Construction - - - General

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