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News and inflation expectation updates

Author

Listed:
  • Gerardo Licandro

    (Banco Central del Uruguay)

  • Miguel Mello

    (Banco Central del Uruguay)

Abstract

Do inflation expectations react to news? In the last decade, Uruguay has resorted to heterodox practices along with inflation targeting to prevent the divergence of inflation, including price subsidies and agreements. Using data from a novel survey of firm's inflation expectations we study individual inflation expectation updates and the impact on individual expectation updates of news regarding monetary policy and other heterodox measures. To control for monetary policy stance we construct a qualitative index of monetary policy based on monetary policy communications. We construct several news indices for monetary policy and other measures. We find that price controls news tends to generate clusters of inflation expectations updates. Using several econometric techniques we are able to find that news about heterodox measures do affect inflation expectations with the expected sign.

Suggested Citation

  • Gerardo Licandro & Miguel Mello, 2015. "News and inflation expectation updates," Documentos de trabajo 2015008, Banco Central del Uruguay.
    • Handle: RePEc:bku:doctra:2015008
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    File URL: https://www.bcu.gub.uy/Estadisticas-e-Indicadores/Documentos%20de%20Trabajo/8.2015.pdf
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    Citations

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    Cited by:

    1. Serafín Frache & Rodrigo Lluberas, 2017. "New information and inflation expectations among firms," Documentos de trabajo 2017013, Banco Central del Uruguay.
    2. Carotta, Gianni & Mello, Miguel & Ponce, Jorge, 2023. "Monetary policy communication and inflation expectations: New evidence about tone and readability," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 4(3).
    3. Fernando Borraz & Miguel Mello, 2020. "Communication, Information and Inflation Expectations," Documentos de trabajo 2020005, Banco Central del Uruguay.
    4. Dzmitry Kruk, 2016. "SVAR Approach for Extracting Inflation Expectations Given Severe Monetary Shocks: Evidence from Belarus," BEROC Working Paper Series 39, Belarusian Economic Research and Outreach Center (BEROC).

    More about this item

    Keywords

    Monetary transmission; inflation expectations; expectations channel;
    All these keywords.

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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