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Large devaluations and inflation inequality: evidence from Brazil

Author

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  • Raphael Gouvea

    (Institute for Applied Economic Research (IPEA); Department of Economics, University of Massachusetts Amherst)

Abstract

In the aftermath of large devaluations, prices of tradable goods/lower-priced varieties increase significantly more than the prices of nontradables/higher-priced varieties. These relative price changes may lead to inflation inequality when household consumption baskets are different across the distribution of income. Using Cravino and Levchenko [2017]’s methodology, we show that inflation of poor households in Brazil was at least 11 percentage points higher than of the rich in the aftermath of the 2002 large devaluation. A detailed case study of the City of São Paulo estimates an inflation inequality ranging from 8 to 11 percentage points in the city.

Suggested Citation

  • Raphael Gouvea, 2020. "Large devaluations and inflation inequality: evidence from Brazil," UMASS Amherst Economics Working Papers 2020-05, University of Massachusetts Amherst, Department of Economics.
    • Handle: RePEc:ums:papers:2020-05
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    File URL: https://scholarworks.umass.edu/econ_workingpaper/288/
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    Cited by:

    1. Misha Galashin & Martin Kanz & Ricardo Perez-Truglia, 2020. "Macroeconomic Expectations and Credit Card Spending," NBER Working Papers 28281, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Exchange Rate Devaluation; Pass-Through; Inflation; Inequality;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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