Firm Inflation Expectations and Monetary Policy in Uruguay

Gerardo Licandro and Miguel Mello ()
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Miguel Mello: Banco Central del Uruguay
Authors registered in the RePEc Author Service: Miguel Mello Costa () and Miguel Martin Mello ()

No 2014006, Documentos de trabajo from Banco Central del Uruguay

Abstract: Using a novel monthly survey of firm inflation expectations for Uruguay from October 2009 to June 2013, this paper studies the impact of monetary policy on inflation expectations at the micro level. Using several panel data techniques we consistently find a negative and statistically significant relationship between monetary policy and inflation expectations. We also find a high level of inertia in expectations. Past inflation changes have a positive impact on inflation expectations, while exchange rate changes have a significant but low importance on expectations. We observe a negative link between inflation expectations and expected economic activity, potentially due to past experiences of a monetary financing of crisis. Contrary to intuition, there is no clear link between firm inflation expectations and the median assessment of experts published by the Central Bank.

Keywords: Monetary transmission; inflation expectations; expectations channel (search for similar items in EconPapers)
JEL-codes: C18 C82 E23 E24 J21 L16 L70 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2014
New Economics Papers: this item is included in nep-cba, nep-lam, nep-mac and nep-mon
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:bku:doctra:2014006

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