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Abrupt monetary policy change and unanchoring of inflation expectations

Author

Listed:
  • Bonomo, Marco
  • Carvalho, Carlos
  • Eusepi, Stefano
  • Perrupato, Marina
  • Abib, Daniel
  • Ayres, João
  • Matos, Silvia

Abstract

Inflation expectations can quickly become unanchored if the central bank undermines its commitment to the inflation target. This paper exploits an abrupt change in monetary policy by the Brazilian Central Bank in 2011 and microdata from a daily survey of professional forecasters to establish support for this claim. Reanchoring came only years later, after a regime shift that included a change of government. A simple model with a well-defined concept of (un)anchored inflation expectations provides a coherent explanation and structural interpretation of our empirical findings.

Suggested Citation

  • Bonomo, Marco & Carvalho, Carlos & Eusepi, Stefano & Perrupato, Marina & Abib, Daniel & Ayres, João & Matos, Silvia, 2024. "Abrupt monetary policy change and unanchoring of inflation expectations," Journal of Monetary Economics, Elsevier, vol. 145(S).
    • Handle: RePEc:eee:moneco:v:145:y:2024:i:s:s0304393224000291
    DOI: 10.1016/j.jmoneco.2024.103576
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    Cited by:

    1. Mauro Sayar Ferreira & Joice Marques Figueiredo, 2024. "The influence of global uncertainty and financial shocks, and sovereign risk shock on the Brazilian term structure of interest rate," Textos para Discussão Cedeplar-UFMG 674, Cedeplar, Universidade Federal de Minas Gerais.

    More about this item

    Keywords

    Inflation expectations; Monetary policy; Anchored expectations; Unanchored expectations; Monetary policy shifts; Brazil;
    All these keywords.

    JEL classification:

    • E53 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Deposit Insurance
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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