Measuring inflation persistence in Brazil using a Multivariate Model

Produced by: 
Banco Central do Brasil
Available from: 
November 2013
Paper author(s): 
Vicente da Gama Machado
Marcelo Savino Portugal
Macroeconomics and Monetary Policy

We estimate inflation persistence in Brazil in a multivariate framework of unobserved components, accounting for the following sources affecting inflation persistence: Deviations of expectations from the actual policy target; persistence of the factors driving inflation; and the usual intrinsic measure of persistence, evaluated through lagged inflation terms. Data on inflation, output and interest rates are decomposed into unobserved components. To simplify the estimation of a great number of unknown variables, we employ Bayesian analysis. Our results indicate that expectations-based persistence matters considerably for inflation persistence in Brazil.


Research section: 
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