Inflation bias in Latin America
This paper accesses the presence of inflation bias in major Latin American Economies over the past decade. Using a small-scale New Keynesian DSGE model and Bayesian Techniques, the time-varying neutral rate of interest is estimated for major Latin American economies. Then the deviations in the polic...
| Autores: | ; |
|---|---|
| Tipo de documento: | Artículo |
| Estado: | Published version |
| Fecha de publicación: | 2016 |
| País: | Brasil |
| Institución: | FGV |
| Repositorio: | Repositório Institucional do FGV (FGV Repositório Digital) |
| Lenguaje: | Inglés |
| OAI Identifier: | oai:repositorio.fgv.br:10438/16870 |
| Acceso en línea: | http://hdl.handle.net/10438/16870 |
| Nivel de acceso: | Acceso abierto |
| Palabra clave: | Monetary policy Latin America Neutral rate Inflation bias DSGE Economia Inflação - América Latina Política monetária |
| Sumario: | This paper accesses the presence of inflation bias in major Latin American Economies over the past decade. Using a small-scale New Keynesian DSGE model and Bayesian Techniques, the time-varying neutral rate of interest is estimated for major Latin American economies. Then the deviations in the policy rate from the neutral rate are overlapped with deviations in current inflation from target. This simple procedure allows the identification of three different regimes of monetary policy – too easy, too restrictive and appropriate. The main result is that Latin American Central Banks often set monetary policy too easy. Analogously, the same conclusion is found if one compares the policy rate with a Taylor Rule-based interest rate aimed at the center of the inflation target range. Such analysis provides evidence of inflation bias in the region, with the exception of Chile. |
|---|