What do Latin American inflation targeters care about? A comparative Bayesian estimation of central bank preferences
Stephen McKnight (),
Alexander Mihailov () and
Antonio Pompa Rangel
Journal of Macroeconomics, 2020, vol. 63, issue C
This paper employs Bayesian estimation to uncover the central bank preferences of the five Latin American inflation targeting countries with floating exchange rates: Brazil, Chile, Colombia, Mexico, and Peru. The target weights of each country’s central bank loss function are estimated using a medium-scale small open economy New Keynesian model with imperfect exchange-rate pass-through under either complete or incomplete international asset markets. Bayesian model comparison selects: (i) unambiguously the complete markets model version; (ii) the model specification with explicit concern for real exchange rate stabilization, with the exception of Peru. Our results suggest that the central banks of Mexico and Peru are closest to following a strict inflation targeting regime, whereas Brazil, Chile, and Colombia also assign a sizeable weight to output gap and real exchange rate stabilization. Finally, the estimated preference weights for each central bank are shown to credibly reflect their legal mandates.
Keywords: Bayesian model comparison; International asset market structure; Central bank preferences; Inflation targeting; Latin America; Small open economies (search for similar items in EconPapers)
JEL-codes: C51 E52 F41 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: What do Latin American inflation targeters care about? A comparative Bayesian estimation of central bank preferences (2016)
Working Paper: What Do Latin American Inflation Targeters Care About? A Comparative Bayesian Estimation of Central Bank Preferences (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:jmacro:v:63:y:2020:i:c:s0164070418304737
Access Statistics for this article
Journal of Macroeconomics is currently edited by Douglas McMillin and Theodore Palivos
More articles in Journal of Macroeconomics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().