Nueva publicación del Prof. Gabriel Rodriguez y Luis Surco en el journal Latin American Economic Review

24/2/2025

Nuestro Prof. Gabriel Rodriguez junto a Luis Surco publicaron el artículo Modeling the Trend, Persistence, and Volatility of Inflation in Pacific Alliance Countries: An Empirical Application Using a Model with Inflation Bands en el journal Latin American Economic Review.

Abstract

This paper estimates and analyzes the dynamics of trend inflation, as well as the persistence and volatilityof the inflation gap, in the Pacific Alliance countries (Chile, Colombia, Mexico, and Peru). The econometricapproach employs methodologies proposed by Stock and Watson (2007) and Chan et al. (2013), includingthe  AR-Trend-Bound  model,  which  incorporates  the  implications  of  inflation  targeting  in  estimating  theunobserved  components  of  inflation.   The  results  show  that  this  model  effectively  attributes  most  of  thepermanent component to trend inflation.  Additionally, all four countries exhibit a declining trend inflationduring the 1990s, stabilization in the first two decades of the century, and a growing trend inflation followingthe  onset  of  the  COVID-19  pandemic.   The  low  levels  of  inflation  gap  persistence  before  the  pandemicreflect the effectiveness of central banks in keeping inflation close to its trend level.  Lastly, the volatilityof the inflation gap captures the Great Moderation of inflation,  with pandemic-era increases in volatilityreaching levels comparable to those observed in the 1990s

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