IDEAS home Printed from https://ideas.repec.org/p/bcb/wpaper/354.html
   My bibliography  Save this paper

Phillips curve in Brazil: an unobserved components approach

Author

Listed:
  • Vicente da Gama Machado
  • Marcelo Savino Portugal

Abstract

This paper estimates reduced-form Phillips curves for Brazil with a framework of time series with unobserved components, in the spirit of Harvey (2011). However, we allow for expectations to play a key role using data from the Central Bank of Brazil’s Focus survey. Besides GDP, we also use industrial capacity utilization rate and IBC-Br, as measures of economic activity. Our findings support the view that Brazilian inflation targeting has been successful in reducing the variance of both the seasonality and level of the inflation rate, at least until the beginning of the subprime crisis, when there was a dramatic drop in activity. Furthermore, inflation in Brazil seems to have responded gradually less to measures of economic activity in recent years. This provides some evidence of a flattening of the Phillips curve in Brazil, a trend previously shown by recent studies for other countries

Suggested Citation

  • Vicente da Gama Machado & Marcelo Savino Portugal, 2014. "Phillips curve in Brazil: an unobserved components approach," Working Papers Series 354, Central Bank of Brazil, Research Department.
  • Handle: RePEc:bcb:wpaper:354
    as

    Download full text from publisher

    File URL: http://www.bcb.gov.br/pec/wps/ingl/wps354.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Kuttner, Ken & Robinson, Tim, 2010. "Understanding the flattening Phillips curve," The North American Journal of Economics and Finance, Elsevier, vol. 21(2), pages 110-125, August.
    2. Mavroeidis, Sophocles, 2005. "Identification Issues in Forward-Looking Models Estimated by GMM, with an Application to the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(3), pages 421-448, June.
    3. Bonomo, Marco Antonio Cesar & Brito, Ricardo D., 2002. "Regras Monetárias e Dinâmica Macroeconômica no Brasil: Uma Abordagem de Expectativas Racionais," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 56(4), October.
    4. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    5. Angelo M. Fasolo & Marcelo Savino Portugal, 2003. "Imperfect Rationality and Inflationary Inertia: a New Estimation of the Phillips Curve for Brazil," Anais do XXXI Encontro Nacional de Economia [Proceedings of the 31st Brazilian Economics Meeting] b34, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    6. Klaus Adam & Mario Padula, 2011. "Inflation Dynamics And Subjective Expectations In The United States," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 13-25, January.
    7. Jeremy Rudd & Karl Whelan, 2007. "Modeling Inflation Dynamics: A Critical Review of Recent Research," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 155-170, February.
    8. Henzel, Steffen & Wollmershäuser, Timo, 2008. "The New Keynesian Phillips curve and the role of expectations: Evidence from the CESifo World Economic Survey," Economic Modelling, Elsevier, vol. 25(5), pages 811-832, September.
    9. Adolfo Sachsida & Marcio Ribeiro & Claudio Hamilton dos Santos, 2009. "A Curva de Phillips e a Experiência Brasileira," Discussion Papers 1429, Instituto de Pesquisa Econômica Aplicada - IPEA.
    10. Arnildo da Silva Correa & André Minella, 2005. "Mecanismos Não-Lineares De Repasse Cambial: Um Modelo De Curva De Phillips Com Threshold Para O Brasil," Anais do XXXIII Encontro Nacional de Economia [Proceedings of the 33rd Brazilian Economics Meeting] 033, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    11. Charles R. Nelson & Jaejoon Lee, 2007. "Expectation horizon and the Phillips Curve: the solution to an empirical puzzle," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(1), pages 161-178.
    12. Arruda, Elano Ferreira & Ferreira, Roberto Tatiwa & Castelar, Ivan, 2011. "Modelos lineares e não lineares da curva de Phillips para previsão da taxa de Inflação no Brasil," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 65(3), September.
    13. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    14. Basistha, Arabinda & Nelson, Charles R., 2007. "New measures of the output gap based on the forward-looking new Keynesian Phillips curve," Journal of Monetary Economics, Elsevier, vol. 54(2), pages 498-511, March.
    15. Carlos Hamilton Vasconcelos Araujo & Osmani Teixeira de Carvalho Guillén, 2008. "Previsão de inflação com incerteza do hiato do produto no Brasil," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807211138520, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    16. Warapong Wongwachara & Anusorn Minphimai, 2009. "Unobserved Component Models of the Phillips Relation in the ASEAN Economy," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 5(2), pages 241-256, July.
    17. Lena Vogel, 2008. "The Relationship between the Hybrid New Keynesian Phillips Curve and the NAIRU over Time," Macroeconomics and Finance Series 200803, University of Hamburg, Department of Socioeconomics.
    18. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 27(4), pages 975-984, November.
    19. Mise, Emi & Kim, Tae-Hwan & Newbold, Paul, 2005. "On suboptimality of the Hodrick-Prescott filter at time series endpoints," Journal of Macroeconomics, Elsevier, vol. 27(1), pages 53-67, March.
    20. Galí, Jordi & Gertler, Mark, 1999. "Inflation Dynamics: A Structural Economic Analysis," CEPR Discussion Papers 2246, C.E.P.R. Discussion Papers.
    21. Alexandre A. Tombini & Sergio A. Lago Alves, 2006. "The Recent Brazilian Disinflation Process and Costs," Working Papers Series 109, Central Bank of Brazil, Research Department.
    22. Jeff Fuhrer & George Moore, 1995. "Inflation Persistence," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 127-159.
    23. Carlos Hamilton V Araujo & Wagner P Gaglianone, 2010. "Survey-based inflation expectations in Brazil," BIS Papers chapters,in: Bank for International Settlements (ed.), Monetary policy and the measurement of inflation: prices, wages and expectations, volume 49, pages 107-114 Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Palma, Andreza Aparecida & Portugal, Marcelo Savino, 2014. "Preferences of the Central Bank of Brazil under the inflation targeting regime: Estimation using a DSGE model for a small open economy," Journal of Policy Modeling, Elsevier, vol. 36(5), pages 824-839.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcb:wpaper:354. 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: (Francisco Marcos Rodrigues Figueiredo). General contact details of provider: http://www.bcb.gov.br/?english .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.