Indexation and Inflationary Inertia: Brazil 1964-1985 |
| |
| Authors: | de Holanda Barbosa Fernando; McNelis Paul D |
| |
| Institution: | Fernando de Holanda Barbosa is a professor of economics in the Graduate School of Economics at the Getulio Vargas Foundation, Rio de Janeiro. Paul D. McNelis is an associate professor in the Department of Economics, Georgetown University, Washington, D.C. Financial support was provided by the Brazilian National Research Council. An earlier version of this paper was presented at the 1985 World Congress of the Econometric Society. The authors are grateful to the referees for helpful comments. |
| |
| Abstract: | Some governments facing high rates of inflation have adoptedwage and exchange rate indexation in an attempt to offset thecosts to workers and exporters. But indexation based on pastvalues of inflation is considered to be a powerful source ofcurrent and future inflation that undermines fiscal and monetarystringency designed to reduce inflation. Brazil indexed wagesand the exchange rate for more than twenty years, and we examineBrazilian evidence on these issues. We derive a transfer functionand estimate time-varying parameters to allow for the changesin indexing policy over the period. We find that the increasedfrequency of wage and exchange rate adjustment amplified theeffect of past inflation and made it less sensitive to monetaryand fiscal policies and more vulnerable to domestic agriculturalsupply shocks. Indexing did not eliminate the effectivenessof monetary policy, however, which retained a significant effectthroughout the indexation period. |
| |
| Keywords: | |
| 本文献已被 Oxford 等数据库收录！ |
|
