Inflation targeting in Latin America: Empirical analysis using GARCH models

No 826, Working Papers from Banco de España

Abstract: During the last years, a number of countries have adopted formal inflation targeting (IT) monetary policy frameworks in a context of global inflation moderation. This paper studies inflation dynamics in eight Latin American countries, some of which have adopted formal targets. We analyze possible benefits associated with IT in terms of lower inflation, inflation volatility and volatility persistence. To describe inflation dynamics and evaluate its impact, we use an unobserved components model, where each component can follow a GARCH type process. In general, the main findings of the empirical exercise show that the adoption of IT has been useful to reduce the inflation level and volatility in these countries.

Keywords: Inflation targets; inflation uncertainty; GARCH; structural time series models (search for similar items in EconPapers)
JEL-codes: C22 C51 E52 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2008-12
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Inflation targeting in Latin America: Empirical analysis using GARCH models (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:0826

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