Inflation Persistence in Brazil: A Cross Country Comparison
23 Pages Posted: 30 Apr 2014
Date Written: April 2014
Inflation persistence is sometimes defined as the tendency for price shocks to push the inflation rate away from its steady state - including an inflation target - for a prolonged period. Persistence is important because it affects the output costs of lowering inflation back to the target, often described as the “sacrifice ratio”. In this paper I use inflation expectations to provide a comparison of inflation persistence in Brazil with a sample of inflation targeting (IT) countries. This approach suggests that inflation persistence increased in Brazil through early 2013, in contrast to many of its IT peers, mainly due to “upward” persistence. The 2013 rate hiking cycle may have contributed to some recent decline in persistence.
Keywords: Inflation, Brazil, Inflation targeting, Monetary policy, Cross country analysis, Economic models, actual inflation, inflation rate, annual inflation, monetary fund, rate of inflation, annual inflation rate, monetary economics, rising inflation, central bank, high inflation, monetary policy reaction function, inflation data, expectations of inflation, monetary regimes, inflation process, change in inflation, monetary policy regime, inflation dynamics, rise in inflation, price level, inflation targeting regime
JEL Classification: E31, E32, P22
Suggested Citation: Suggested Citation