On the Credibility of Inflation Targeting Regimes in Latin America

Rodrigo Mariscal, Andrew Powell and Pilar Tavella

No 6604, IDB Publications (Working Papers) from Inter-American Development Bank

Abstract: Inflation targeting has been adopted in a set of emerging economies, including eight countries in Latin America. The success of this regime may depend critically on the credibility of the target and the expectation that the authorities will take appropriate actions if the target is breached. This paper exploits a database of inflation expectations and attempts to measure whether, for a set of inflation targeters in Latin America, expectations are well anchored. A tighter anchoring of expectations is interpreted as a gain in credibility. Also considered are the effects on the credibility of the regime if the inflation target is breached. The results indicate that while inflation expectations have not been fully anchored over the whole sample period, credibility has risen, but at the same time the cost of breaching the target has grown.

Keywords: Inflation targeting; Expectations; Latin America; Credibility (search for similar items in EconPapers)
JEL-codes: E31 E42 E58 O54 (search for similar items in EconPapers)
Date: 2014-08
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: On the Credibility of Inflation-Targeting Regimes in Latin America (2018)
Working Paper: On the credibility of inflation-targeting regimes in Latin America (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:idb:brikps:6604

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