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Indexing, exchange rate policy and effects of inflationary feedback in Latin America

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  • Paul D. McNelis

Abstract

This paper examines inflationary adjustment processes in Argentina, Brazil,Chile, Ecuador, Peru, and Uruguay with time-varying estimation techniques to determine therelationship between inflationary inertia or feedback effects from past to current inflationand the degree of indexation of wages and exchange rates to past inflation rates. The resultsshow that reductions in the degree of exchange rate linkage to past inflation have not beenparticularly helpful in larger or relatively more diversified economies (such as Argentina,Brazil, or Chile), while reductions in wage linkages to past inflation rates have had strongbut short-lived effects. JEL Classification: F31; E31; J38.

Suggested Citation

  • Paul D. McNelis, 1986. "Indexing, exchange rate policy and effects of inflationary feedback in Latin America," Brazilian Journal of Political Economy, Center of Political Economy, vol. 6(4), pages 607-623.
    • Handle: RePEc:ekm:repojs:v:6:y:1986:i:4:p:607-623:id:1822
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    More about this item

    Keywords

    Exchange rate; inflation; stabilization; wage policy;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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