We are indebted to the editor, Pok-sang Lam, two anonymous referees, Fabio Giambiagi, Peter Jarrett, Val Koromzay, Annabelle Mourougane, and Rodrigo Valdés for helpful comments and suggestions. Helpful comments and discussions were also provided by participants at the Seminar on Monetary Policy in Emerging Markets, jointly organized by the OECD and the Bank of England, the Economics Seminar at Namur University, the ADRES Ph.D. Meeting in Toulouse, and the RIEF Doctoral Meeting organized by the University of Barcelona. The authors remain solely responsible for any remaining errors and omissions. The opinions expressed in this paper are the authors' own and do not necessarily reflect those of the OECD or its member countries.
Monetary Policy and Inflation Expectations in Latin America: Long-Run Effects and Volatility Spillovers
Article first published online: 6 NOV 2009
© 2009 The Ohio State University
Journal of Money, Credit and Banking
Volume 41, Issue 8, pages 1671–1690, December 2009
How to Cite
DE MELLO, L. and MOCCERO, D. (2009), Monetary Policy and Inflation Expectations in Latin America: Long-Run Effects and Volatility Spillovers. Journal of Money, Credit and Banking, 41: 1671–1690. doi: 10.1111/j.1538-4616.2009.00273.x
- Issue published online: 6 NOV 2009
- Article first published online: 6 NOV 2009
- Received September 24, 2007; and accepted in revised form June 10, 2009.
- inflation targeting;
- multiple cointegrating vectors;
- volatility spillovers;
This paper uses multiple cointegration analysis to estimate simultaneously a monetary reaction function and the determinants of expected inflation for Brazil, Chile, Colombia, and Mexico. In addition, M-GARCH modeling is used to test for the presence of volatility spillovers between the monetary stance and inflation expectations. The analysis shows that there are long-term relationships between the interest rate, expected inflation, and the inflation target, and that greater volatility in the monetary stance increases the volatility of expected inflation in Brazil, Colombia, and Mexico.