Inflation persistence is sometimes defined as the tendency for price shocks to push the inflation rate away from its steady stateaincluding an inflation targetafor a prolonged period. Persistence is important because it affects the output costs of lowering inflation back to the target, often described as the asacrifice ratioa. 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 aupwarda persistence. The 2013 rate hiking cycle may have contributed to some recent decline in persistence.I. INTRODUCTION Inflation persistence is sometimes defined as the tendency for price shocks to push the inflation rate away from its steady ... This is a reduced form interpretation of persistence and does not provide a structural explanation. ... including: inertia in the underlying adriving process, a such as marginal costs or the output gap; the policymakera#39;s reaction function to price or output shocks; and anbsp;...
|Title||:||Inflation Persistence in Brazil - A Cross Country Comparison|
|Author||:||Shaun K. Roache|
|Publisher||:||International Monetary Fund - 2014-04-04|