Testing for asymmetric adjustment in weekly Brazilian inflation

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Abstract

Abstract

This study analyses the nature of weekly inflation response to shocks in the Brazilian economy by adopting a generalized quantile autoregression model in which the autoregressive parameter is allowed to be quantile-dependent. We test for unit root at different conditional quantiles of the response variable, by characterizing its asymmetric dynamics along the business cycle. The method allows us to estimate the magnitude, sign, and the significance of actual shocks that affect Brazilian inflation. We evaluate the robustness of results by adopting a bootstrap procedure. Concerning previous studies, we find evidence of stronger asymmetric persistence in inflationary dynamics in which an inflationary shock below the average dissipates very fast when compared to an inflationary impulse occurring above the average. Location, size, and the sign of a random shock might be essential for inflation adjustment towards long-run equilibrium. The results do not support the full inertia hypothesis.

Keywords: Inflation; Local persistence; Asymmetric dynamics; Quantile Regression; Bootstrap.

JEL Codes: C14; C22; C13.

Author Biography

André M. Marques, Department of Economics, Federal University of Paraíba, João Pessoa, PB, Brazil

Possui graduação em Ciências Econômicas pela Universidade Federal do Rio Grande do Sul, especialização em Estatística pela Universidade Federal de Santa Maria, mestrado em Economia pela Pontifícia Universidade Católica do Rio Grande do Sul e doutorado em Economia pela Universidade Federal do Rio Grande do Sul. Foi Bolsista de Doutorado Sanduíche na Universidade Técnica de Lisboa (2008) e atualmente é Professor Adjunto do Departamento de Economia da Universidade Federal do Rio Grande do Norte. Suas principais áreas de interesse são Macroeconomia (com ênfase em Teoria da Moeda e do Crédito) e Estatística.

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Published

2021-07-19

How to Cite

MARQUES, A. M. Testing for asymmetric adjustment in weekly Brazilian inflation. Nova Economia, [S. l.], v. 31, n. 1, p. 67–85, 2021. Disponível em: https://revistas.face.ufmg.br/index.php/novaeconomia/article/view/5269. Acesso em: 22 nov. 2024.

Issue

Vol. 31 No. 1 (2021): Revista Nova Economia

Section

Regular Issue

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Copyright (c) 2021 André M. Marques

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