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An Empyrical Analysis of Price Stickiness in Five Latin American Inflation Targeters:2000-2016

Olivo, Victor (2018): An Empyrical Analysis of Price Stickiness in Five Latin American Inflation Targeters:2000-2016.

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Abstract

The main objective of this study is to examine empirically the assumption of price stickiness in five Latin American countries that have implemented inflation targeting schemes during the period under study 2000-2016. These countries are Brazil, Chile, Colombia, Mexico, and Peru. The study adopts a macroeconomic approach suggested by McCallum (1989, 1996) that in turn follows a methodology proposed by Barro (1977, 1978, 1981), and Barro and Rush (1980). An important contribution of this paper is that it separates monetary shocks in two categories: M1 shocks and policy rate shocks. Both types of shocks exhibit durable effects on real output, though in general, M1 surprises tend to be more persistent than policy rate surprises.

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