A Markov-switching model of inflation: looking at the future during uncertain times
In this paper, we analyze the dynamic of inflation in Venezuela, during the last eighteen years, through a Markov-switching estimation of a New Keynesian Phillips curve. Estimation is carried out using the EM algorithm. The model´s estimates distinguish between a "normal or backward looking&quo...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
Universidad Autónoma Metropolitana
2010-01-01
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| Series: | Análisis Económico |
| Online Access: | http://www.redalyc.org/articulo.oa?id=41315994005 |
| Summary: | In this paper, we analyze the dynamic of inflation in Venezuela, during the last eighteen years, through a Markov-switching estimation of a New Keynesian Phillips curve. Estimation is carried out using the EM algorithm. The model´s estimates distinguish between a "normal or backward looking" regime and a "rational expectation" regime consistent with episodes of high uncertainty regarding the performance of the economy. This characterization of regimes is based on two elements: the description of the process of formation of inflationary expectations and the main economic events occurred during each regime. |
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| ISSN: | 0185-3937 |