Regional inflation dynamics and inflation targeting. The case of Peru
The Central Reserve Bank of Peru (BCRP) has been targeting inflation for more than a decade, using Lima’s inflation as the operational measure. An alternative indicator is countrywide inflation, whose quality and real-time availability have improved substantially. Given these competing measures, two policy questions arise: What have been the implications for national inflation of targeting Lima’s inflation? Would shifting to a national aggregate significantly affect the workings of monetary policy in Peru? To answer these questions, we estimate a large, but parsimonious, error correction model and investigate how regional shocks propagate across the country. The results indicate that a shock to Lima’s inflation is transmitted fast and strongly elsewhere in the country, whereas the effects of shocks in other regions are limited and short-lived. This constitutes supporting evidence to the view that by targeting Lima’s inflation, the BCRP has effectively, albeit indirectly, targeted national inflation.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 18 (2015)
Issue (Month): (November)
|Contact details of provider:|| Postal: Av. Córdoba 374, (C1054AAP) Capital Federal|
Phone: (5411) 6314-3000
Fax: (5411) 4314-1654
Web page: http://www.cema.edu.ar/publicaciones/jae.html
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Álvaro Monge & Diego Winkelried, 2009.
"PPC y convergencia de precios: un análisis para las ciudades del Perú,"
ENSAYOS SOBRE POLÍTICA ECONÓMICA,
BANCO DE LA REPÚBLICA - ESPE, vol. 27(58), pages 56-105, August.
- Álvaro Monge & Diego Winkelried, 2009. "Ppc Y Convergencia De Precios: Un Análisis Para Las Ciudades Del Perú," Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 27(58), pages 56-105, Agosto.
- Helena Marques & Gabriel Pino & Juan Dios Tena Horrillo, 2014. "Regional inflation dynamics using space–time models," Empirical Economics, Springer, vol. 47(3), pages 1147-1172, November.
- H. Marques & G. Pino & JdD Tena, 2009. "Regional inflation dynamics using space-time models," Working Paper CRENoS 200915, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
- Helena Marques & Gabriel Pino & J.D.Tena, 2009. "Regional inflation dynamics using space-time models," DEA Working Papers 40, Universitat de les Illes Balears, Departament d'Economía Aplicada.
- Rogers, John H., 2007. "Monetary union, price level convergence, and inflation: How close is Europe to the USA?," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 785-796, April.
- Fabio Busetti & Silvia Fabiani & Andrew Harvey, 2006. "Convergence of Prices and Rates of Inflation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(s1), pages 863-877, December.
- Fabio Busetti & Silvia Fabiani & Andrew Harvey, 2006. "Convergences of prices and rates of inflation," Temi di discussione (Economic working papers) 575, Bank of Italy, Economic Research and International Relations Area.
- Gonzalo, Jesus & Ng, Serena, 2001. "A systematic framework for analyzing the dynamic effects of permanent and transitory shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 25(10), pages 1527-1546, October.
- Gonzalo, J. & Ng, S., 1996. "A Systematic Framework for Analyzing the Dynamic Effects of Permanent and Transitory Shocks," Cahiers de recherche 9603, Universite de Montreal, Departement de sciences economiques.
- Gonzalo, J. & Ng, S., 1996. "A Systematic Framework for Analyzing the Dynamic Effects of Permanent and Transitory Shocks," Cahiers de recherche 9603, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Ng, Serena & Gonzalo, Jesús, 1996. "A systematic framework for analyzing the dynamic effects of permanent and transitory shocks," DES - Working Papers. Statistics and Econometrics. WS 6203, Universidad Carlos III de Madrid. Departamento de Estadística.
- Guenter W. Beck & Kirstin Hubrich & Massimiliano Marcellino, 2009. "Regional inflation dynamics within and across euro area countries and a comparison with the United States," Economic Policy, CEPR;CES;MSH, vol. 24, pages 141-184, 01.
- Kirstin Hubrich, 2008. "Regional inflation dynamics within and across euro area countries and a comparison with the United States," Research Bulletin, European Central Bank, vol. 7, pages 7-9.
- Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
- Miguel Ángel Saldarriaga & Diego Winkelried, 2013. "Trade linkages and growth in Latin America: An SVAR analysis," International Economics, CEPII research center, issue 135-136, pages 13-28.
- Winkelried, Diego & Saldarriaga, Miguel, 2012. "Trade linkages and growth in Latin America: A time-varying SVAR approach," Working Papers 2012-011, Banco Central de Reserva del Perú.
- Gonzalo, Jesus & Granger, Clive W J, 1995. "Estimation of Common Long-Memory Components in Cointegrated Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(1), pages 27-35, January.
- Gonzalo, J. & Granger, C., 1992. "Estimation of Common Long-Memory Components in Cointegrated Systems," Papers 4, Boston University - Department of Economics.
- Pesaran M.H. & Schuermann T. & Weiner S.M., 2004. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 129-162, April.
- PESARAN M. Hashem & SCHUERMANN Til & WEINER Scott, "undated". "Modelling Regional Interdependencies using a Global Error-Correcting Macroeconometric Model," EcoMod2003 330700121, EcoMod.
- M. Hashem Pesaran & Til Schuermann & Scott M. Weiner, 2002. "Modeling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Center for Financial Institutions Working Papers 01-38, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Pesaran, M.H. & Weiner, S.M., 2001. "Modelling Regional Interdependencies Using a Global Error-Correcting Macroeconometric Model," Cambridge Working Papers in Economics 0119, Faculty of Economics, University of Cambridge.
- M. Hashem Pesaran & Til Schuermann & Scott M. Weiner, 2001. "Modelling regional interdependencies using a global error-correcting macroeconometric model," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 B4-1, International Conferences on Panel Data.
- repec:cii:cepiie:2013-q3-4-135-136-12 is not listed on IDEAS
- Park, Joon Y. & Phillips, Peter C.B., 1988. "Statistical Inference in Regressions with Integrated Processes: Part 1," Econometric Theory, Cambridge University Press, vol. 4(03), pages 468-497, December.
- Peter C.B. Phillips & Joon Y. Park, 1986. "Statistical Inference in Regressions with Integrated Processes: Part 1," Cowles Foundation Discussion Papers 811R, Cowles Foundation for Research in Economics, Yale University, revised Aug 1987.
- Renzo Rossini & Marco Vega, 2008. "The monetary policy transmission mechanism under financial dollarisation: the case of Peru 1996-2006," BIS Papers chapters,in: Bank for International Settlements (ed.), Transmission mechanisms for monetary policy in emerging market economies, volume 35, pages 395-412 Bank for International Settlements.
- Renzo Rossini & Marco Vega, 2007. "The monetary policy transmission mechanism under financial dollarization: the case of Peru 1996-2006," Working Papers 2007-017, Banco Central de Reserva del Perú.
- David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1211-1236.
- David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," NBER Working Papers 5654, National Bureau of Economic Research, Inc.
- Phillips, P.C.B., 1986. "Understanding spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 33(3), pages 311-340, December.
- Peter C.B. Phillips, 1985. "Understanding Spurious Regressions in Econometrics," Cowles Foundation Discussion Papers 757, Cowles Foundation for Research in Economics, Yale University.
- repec:cii:cepiei:2013-q3-4-135-136-2 is not listed on IDEAS
- Elliott, Graham & Fatas, Antonio, 1996. "International business cycles and the dynamics of the current account," European Economic Review, Elsevier, vol. 40(2), pages 361-387, February.
- Elliott, Graham & Fatás, Antonio, 1995. "International Business Cycles and the Dynamics of the Current Account," CEPR Discussion Papers 1280, C.E.P.R. Discussion Papers.
- Adrian Armas & Lucy Vallejos & Marco Vega, 2010. "Measurement of price indices used by the central bank of Peru," BIS Papers chapters,in: Bank for International Settlements (ed.), Monetary policy and the measurement of inflation: prices, wages and expectations, volume 49, pages 259-283 Bank for International Settlements.
- Efraín Gonzales de Olarte, 2003. "Regiones Integradas: Ley de Incentivos para la Integración y Conformación de Regiones Lineamientos Económicos y Políticos," Libros de otras Editoriales, Departamento de Economía - Pontificia Universidad Católica del Perú, edition 1, number otr-2003-03 edited by Walter Alejos Calderon, Agosto. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:cem:jaecon:v:18:y:2015:n:2:p:199-224. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valeria Dowding)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.