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Empirical Regularities of Inflation in Latin America

Author

Listed:
  • Javier Garcia-Cicco

    (UCEMA)

  • Lorena Garegnani

    (Central Bank of Argentina)

  • Maximiliano Gomez Aguirre

    (Central Bank of Argentina)

  • Ariel Krysa

    (Central Bank of Argentina)

  • Luis Libonatti

    (Central Bank of Argentina)

Abstract

This paper makes a comparative study of the inflation dynamics of Argentina, Brazil, Chile, Colombia, Mexico and Uruguay during the 2004-2019 period. The goal is to document a number of empirical regularities that are useful for some discussions about the determinants and mechanisms of the inflationary processes of those countries. Firstly, we apply a cointegration analysis, and two long-run relationships are found in all the analyzed countries. One relationship is related to the influence of different costs on domestic prices. The other relationship is associated with the money demand. Then, we propose a methodology for decomposing the short-run evolution of the year-on-year inflation between the effects of lagged variables and the contemporary effects of the determinants. As a result, we show that the influence of the inflation persistence explains a big part of the inflation dynamics in Argentina, Uruguay and, to a lesser extent, in Brazil. In Colombia and Mexico, the relative contribution of the autonomous persistence and the lags of the other determinants is more balanced. Finally, in Chile the autonomous persistence has a marginal influence. When focusing on the dynamics influenced by the lagged values of the other determinants, we found heterogeneous explanations in the countries of the sample.

Suggested Citation

  • Javier Garcia-Cicco & Lorena Garegnani & Maximiliano Gomez Aguirre & Ariel Krysa & Luis Libonatti, 2022. "Empirical Regularities of Inflation in Latin America," BCRA Working Paper Series 2022101, Central Bank of Argentina, Economic Research Department.
    • Handle: RePEc:bcr:wpaper:2022101
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    Cited by:

    1. Manuel de Mier & Fernando Delbianco, 2023. "Cu\'anto es demasiada inflaci\'on? Una clasificaci\'on de reg\'imenes inflacionarios," Papers 2401.02428, arXiv.org.
    2. De Mier Manuel, 2023. "¿Cuánto es demasiada inflación? Una clasificación de regímenes inflacionarios," Asociación Argentina de Economía Política: Working Papers 4640, Asociación Argentina de Economía Política.

    More about this item

    Keywords

    inflation; Latin America; econometric models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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