IDEAS home Printed from https://ideas.repec.org/p/bdm/wpaper/2006-11.html
   My bibliography  Save this paper

Inflation Dynamics in Latin America

Author

Listed:
  • Ramos Francia Manuel
  • Capistrán Carlos

Abstract

We analyze inflation's persistence in the 1980-2006 period for the ten largest Latin American economies using univariate time-series techniques. Although the estimated degree of inflation persistence appears to be different across countries, for the region as a whole the persistence seems to be very high. However, the estimated degree of persistence falls in all countries once we permit structural breaks in the mean of inflation. The timing of these breaks coincides with shifts in the monetary policy regimes and is similar across countries. Regardless of the changes in the mean, the degree of persistence appears to be decreasing in the region, even though for some countries persistence does not seem to be changing.

Suggested Citation

  • Ramos Francia Manuel & Capistrán Carlos, 2006. "Inflation Dynamics in Latin America," Working Papers 2006-11, Banco de México.
  • Handle: RePEc:bdm:wpaper:2006-11
    as

    Download full text from publisher

    File URL: https://www.banxico.org.mx/publications-and-press/banco-de-mexico-working-papers/%7BB0BCDB23-D422-F76E-3D13-46395DC13482%7D.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jeff Fuhrer & George Moore, 1995. "Inflation Persistence," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 127-159.
    2. N. Gregory Mankiw & Ricardo Reis, 2002. "Sticky Information versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," The Quarterly Journal of Economics, Oxford University Press, vol. 117(4), pages 1295-1328.
    3. Andrews, Donald W K & Chen, Hong-Yuan, 1994. "Approximately Median-Unbiased Estimation of Autoregressive Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 187-204, April.
    4. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
    5. Bruce E. Hansen, 1999. "The Grid Bootstrap And The Autoregressive Model," The Review of Economics and Statistics, MIT Press, vol. 81(4), pages 594-607, November.
    6. Malcolm D. Knight, 2003. "Monetary policy and uncertainty : adapting to a changing economy : general discussion : overview panel," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 399-408.
    7. Zivot, Eric & Andrews, Donald W K, 2002. "Further Evidence on the Great Crash, the Oil-Price Shock, and the Unit-Root Hypothesis," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 25-44, January.
    8. Todd E. Clark, 2006. "Disaggregate evidence on the persistence of consumer price inflation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 563-587.
    9. Ms. Reva Krieger & Mr. Robert Rennhack & Ms. Agnes A Belaisch & Mr. Charles Collyns & Ms. Paula De Masi & Mr. Guy M Meredith & Mr. Anoop Singh, 2005. "Stabilization and Reform in Latin America: A Macroeconomic Perspective of the Experience Since the 1990s," IMF Occasional Papers 2005/002, International Monetary Fund.
    10. Elliott, Graham & Rothenberg, Thomas J & Stock, James H, 1996. "Efficient Tests for an Autoregressive Unit Root," Econometrica, Econometric Society, vol. 64(4), pages 813-836, July.
    11. George Kapetanios, 2005. "Unit‐root testing against the alternative hypothesis of up to m structural breaks," Journal of Time Series Analysis, Wiley Blackwell, vol. 26(1), pages 123-133, January.
    12. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    13. Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
    14. Vittorio Corbo & Klaus Schmidt-Hebbel, 2001. "Inflation Targeting in Latin America," Working Papers Central Bank of Chile 105, Central Bank of Chile.
    15. Alan Greenspan, 2003. "Opening remarks : monetary policy and uncertainty : adapting to a changing economy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 1-7.
    16. Klaus Schmidt-Hebbel & Alejandro M. Werner, 2002. "Inflation Targeting in Brazil, Chile, and Mexico: Performance, Credibility, and the Exchange Rate," Economía Journal, The Latin American and Caribbean Economic Association - LACEA, vol. 0(Spring 20), pages 31-90, January.
    17. Daal, Elton & Naka, Atsuyuki & Sanchez, Benito, 2005. "Re-examining inflation and inflation uncertainty in developed and emerging countries," Economics Letters, Elsevier, vol. 89(2), pages 180-186, November.
    18. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 33(1), pages 125-132.
    19. Michael Bruno & Stanley Fischer, 1990. "Seigniorage, Operating Rules, and the High Inflation Trap," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 353-374.
    20. Luca Benati, 2005. "U.K. Monetary Regimes and Macroeconomic Stylised Facts," Computing in Economics and Finance 2005 107, Society for Computational Economics.
    21. Jushan Bai & Pierre Perron, 2003. "Computation and analysis of multiple structural change models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 18(1), pages 1-22.
    22. Stanley Fischer, 2003. "Monetary policy and uncertainty : adapting to a changing economy : overview panel," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 383-389.
    23. Andrew T. Levin & Fabio M. Natalucci & Jeremy M. Piger, 2004. "The macroeconomic effects of inflation targeting," Review, Federal Reserve Bank of St. Louis, vol. 86(Jul), pages 51-80.
    24. Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 153-162, April.
    25. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    26. Janet L. Yellen, 2003. "Monetary policy and uncertainty : adapting to a changing economy : overview panel," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 391-398.
    27. María Dolores Gadea & Laura Mayoral, 2006. "The Persistence of Inflation in OECD Countries: A Fractionally Integrated Approach," International Journal of Central Banking, International Journal of Central Banking, vol. 2(1), March.
    28. Fuhrer, Jeffrey C., 2010. "Inflation Persistence," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 9, pages 423-486, Elsevier.
    29. Pivetta, Frederic & Reis, Ricardo, 2007. "The persistence of inflation in the United States," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1326-1358, April.
    30. Filippo Altissimo & Laurent Bilke & Andrew Levin & Thomas Mathä & Benoit Mojon, 2006. "Sectoral and Aggregate Inflation Dynamics in the Euro Area," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 585-593, 04-05.
    31. anonymous, 2003. "Monetary policy and uncertainty : adapting to a changing economy -a symposium, Jackson Hole, Wyoming, August 28-30, 2003," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City.
    32. Nicoletta Batini, 2006. "Euro area inflation persistence," Empirical Economics, Springer, vol. 31(4), pages 977-1002, November.
    33. Gordon H. Sellon, 2003. "Monetary policy and uncertainty : adapting to a changing economy : an introduction to the Bank's 2003 Economic Symposium," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 1-1.
    34. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
    35. Stock, James H & Watson, Mark W, 2002. "Macroeconomic Forecasting Using Diffusion Indexes," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(2), pages 147-162, April.
    36. Corvoisier, Sandrine & Mojon, Benoît, 2005. "Breaks in the mean of inflation: how they happen and what to do with them," Working Paper Series 451, European Central Bank.
    37. Ramos Francia Manuel & Torres García Alberto, 2006. "Inflation Dynamics in Mexico: A Characterization Using the New Phillips Curve," Working Papers 2006-15, Banco de México.
    38. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Georgios P. Kouretas & Mark E. Wohar, 2012. "The dynamics of inflation: a study of a large number of countries," Applied Economics, Taylor & Francis Journals, vol. 44(16), pages 2001-2026, June.
    2. Hans KREMERS & Andreas LOESCHEL, 2010. "The Strategic Implications of Setting Border Tax Adjustments," EcoMod2010 259600097, EcoMod.
    3. Simone Elmer & Thomas Maag, 2009. "The Persistence of Inflation in Switzerland," KOF Working papers 09-235, KOF Swiss Economic Institute, ETH Zurich.
    4. Tianfeng Li & June Wei, 2015. "Multiple Structural Breaks and Inflation Persistence: Evidence from China," Asian Economic Journal, East Asian Economic Association, vol. 29(1), pages 1-20, March.
    5. Meenagh, David & Minford, Patrick & Nowell, Eric & Sofat, Prakriti & Srinivasan, Naveen, 2009. "Can the facts of UK inflation persistence be explained by nominal rigidity?," Economic Modelling, Elsevier, vol. 26(5), pages 978-992, September.
    6. David Meenagh & Patrick Minford & Eric Nowell & Prakriti Sofat & Naveen Srinivasan, 2007. "Are the facts of UK inflation persistence to be explained by nominal rigidity or changes in monetary regime?," WEF Working Papers 0028, ESRC World Economy and Finance Research Programme, Birkbeck, University of London.
    7. Giorgio Canarella & Rangan Gupta & Stephen M. Miller & Stephen K. Pollard, 2019. "Unemployment rate hysteresis and the great recession: exploring the metropolitan evidence," Empirical Economics, Springer, vol. 56(1), pages 61-79, January.
    8. George Hondroyiannis & Sophia Lazaretou, 2007. "Inflation persistence during periods of structural change: an assessment using Greek data," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 34(5), pages 453-475, December.
    9. María Dolores Gadea & Laura Mayoral, 2006. "The Persistence of Inflation in OECD Countries: A Fractionally Integrated Approach," International Journal of Central Banking, International Journal of Central Banking, vol. 2(1), March.
    10. Carlos Santos & Maria Alberta Oliveira, 2010. "Assessing French inflation persistence with impulse saturation break tests and automatic general-to-specific modelling," Applied Economics, Taylor & Francis Journals, vol. 42(12), pages 1577-1589.
    11. Todd E. Clark, 2006. "Disaggregate evidence on the persistence of consumer price inflation," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 21(5), pages 563-587.
    12. Giorgio Canarella & Stephen Miller, 2016. "Inflation persistence and structural breaks: the experience of inflation targeting countries and the US," Journal of Economic Studies, Emerald Group Publishing, vol. 43(6), pages 980-1005, November.
    13. Bilke, L., 2005. "Break in the Mean and Persistence of Inflation: a Sectoral Analysis of French CPI," Working papers 122, Banque de France.
    14. Andrew T. Levin & Jeremy M. Piger, 2003. "Is inflation persistence intrinsic in industrial economies?," Working Papers 2002-023, Federal Reserve Bank of St. Louis.
    15. Canarella, Giorgio & Miller, Stephen M., 2017. "Inflation targeting and inflation persistence: New evidence from fractional integration and cointegration," Journal of Economics and Business, Elsevier, vol. 92(C), pages 45-62.
    16. John D. Levendis, 2018. "Time Series Econometrics," Springer Texts in Business and Economics, Springer, number 978-3-319-98282-3, December.
    17. Antonio Noriega & Carlos Capistrán & Manuel Ramos-Francia, 2013. "On the dynamics of inflation persistence around the world," Empirical Economics, Springer, vol. 44(3), pages 1243-1265, June.
    18. Logan Rangasamy, 2011. "Food Inflation In South Africa: Some Implications For Economic Policy," South African Journal of Economics, Economic Society of South Africa, vol. 79(2), pages 184-201, June.
    19. Logan Rangasamy, 2009. "Inflation Persistence And Core Inflation: The Case Of South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 77(3), pages 430-444, September.
    20. Lendvai, Julia, 2006. "Inflation dynamics and regime shifts," Working Paper Series 684, European Central Bank.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

    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:bdm:wpaper:2006-11. 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: . General contact details of provider: https://edirc.repec.org/data/bangvmx.html .

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Subgerencia de desarrollo de sistemas (email available below). General contact details of provider: https://edirc.repec.org/data/bangvmx.html .

    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.