Business cycles, expectations and inflation in Brazil: a New-Keynesian Phillips curve analysis

This study examines Brazilian inflation dynamics using the New-Keynesian Phillips curve, considering different levels of economic foresight.

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Quick Facts
Report location: source
Language: English
Publisher:
Authors: Ivan Castelar, Elano Ferreira, Elano Ferreira Arruda, Oliveira De Olivindo, Maria Thalita Arruda
Geographic focus: Brazil
Page count: páginas. 143-15

Methods

The research method involved estimating the New-Keynesian Phillips curve and its hybrid version using the heteroscedasticity-and-autocorrelation-consistent (HAC) estimator of the generalized method of moments (GMM). Monthly data from January 2002 to December 2012 were used, incorporating variables such as the output gap, unemployment gap, firms' real marginal cost, and different measures of inflation expectations.

(Generated with the help of GPT-4)

Key Insights

The research analyzes Brazil's inflation dynamics within the New-Keynesian Phillips curve framework, focusing on the impact of monetary authority discretion on economic agents' expectations and inflation's response to its inertial component and business-cycle fluctuations. Using the generalized method of moments (GMM), the study finds that lower foresight among economic agents makes inflation more sensitive to business-cycle fluctuations and its inertial component. The results suggest that inflation dynamics in Brazil are influenced by both forward-looking expectations and the inertia of past inflation, with a significant inertial component persisting in the Brazilian economy.

(Generated with the help of GPT-4)

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Last modified: 2024/07/26 18:55 by elizabethherfel