Measuring Inflation Persistence in Brazil Using a Multivariate Model

Vicente Machado and Marcelo Portugal

No 331, Working Papers Series from Central Bank of Brazil, Research Department

Abstract: 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.

Date: 2013-11
New Economics Papers: this item is included in nep-cba, nep-lam, nep-mac and nep-mon
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Journal Article: Measuring inflation persistence in Brazil using a multivariate model (2014)
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