Asymmetry of Relative Prices and Inflation Dynamics in Brazil

Fernando Marques Mansilla and Elano Ferreira Arruda

Applied Economics and Finance, 2024, vol. 11, issue 4, 15-27

Abstract: This paper analyzes how the asymmetry of relative prices fits as a measure of supply shock in the Hybrid New Keynesian Phillips Curve (HNPKC). For this purpose, monthly data from January 2003 to November 2023 is used, along with the generalized method of moments robust to heteroskedasticity and autocorrelation (GMM-HAC). The results indicate that the asymmetry of relative prices performs well as an indicator of supply shocks, having a positive effect on inflation, and its impact is amplified in a scenario of greater economic instability. Additionally, there is evidence of strong inertial inflation that intensifies in an unstable environment, while forward-looking expectations are statistically significant only in stable conditions. Finally, the output gap is statistically significant regardless of the macroeconomic scenario analyzed.

Date: 2024
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