Are long-term inflation expectations well-anchored in Brazil, Chile, and Mexico?

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dc.description.abstract We examine whether long-term inflation expectations are well-anchored in Brazil, Chile, and Mexico, employing survey and market-based measures of long-term inflation expectations. For each country, we construct a daily time-series for far forward inflation compensation, a reading of investors’ views on the outlook for inflation in the far future, from sovereign bond prices. For Chile and Mexico, survey measures have tracked these countries’ inflation target quite well. In contrast, survey-based measures of medium- and long-term inflation expectations for Brazil have been moving up in recent years. For all three countries, far forward inflation compensation is volatile and regularly deviates from the inflation target. We then use our daily inflation compensation measures in an event study, regressing daily changes in inflation compensation on news surprises of monetary policy, prices, and the real economy. Far-forward inflation compensation does not significantly react to domestic news surprises, but does react to some U.S. and Chinese news surprises. Subsample analysis shows that inflation expectations have become better anchored predominantly in recent years. Overall, we argue that it may be too premature to conclude that long-term inflations expectations in Brazil, Chile and Mexico have become well-anchored. en
dc.title Are long-term inflation expectations well-anchored in Brazil, Chile, and Mexico? en
dc.contributor.author Robitaille, Patrice
dc.contributor.author De Pooter, Michiel
dc.contributor.author Walker, Ian
dc.contributor.author Zdinak, Michael
dc.date.accessioned 2014-10-27T21:39:42Z
dc.date.available 2014-10-27T21:39:42Z
dc.date.issued 2014-10-27
dc.identifier.uri http://hdl.handle.net/123456789/12589
lacea.language.supported en
dc.description Working Paper
dc.language.iso en
dc.subject Inflation targeting
dc.subject Survey expectations
dc.subject Inflation compensation
dc.subject Brazil
dc.subject Chile
dc.subject Mexico
dc.type Article

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