News and inflation expectation updates

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

No 2015008, Documentos de trabajo from 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.

Keywords: Monetary transmission; inflation expectations; expectations channel (search for similar items in EconPapers)
JEL-codes: E43 E52 E58 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2015
New Economics Papers: this item is included in nep-lam, nep-mac, nep-mon and nep-net
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:bku:doctra:2015008

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