Inflation Targeting in Latin America: Post-Crisis Changes (Part 3)

Appendix Full sample SVAR Shocks – Chile Y Res iduals Inflation R esi duals 4 1.5 2 1.0 0 0.5 -2 0.0 -4 -0.5 -6 -1.0 -8 -1.5 01 02 03 04 05 06 07 08 09 10 11 01 02 03 Polic y R esid uals 04 05 06 07 08 09 10 11 10 11 Ex pe cted Inflatio n Res id uals 0.50 .12 0.25 .08 0.00 .04 -0.25 .00 -0.50 -.04 -0.75 -1.00 -.08 01 02 03 04 05 06 07 08 09 10 11 09 10 11 01 02 03 04 05 06 07 08 09 Ex c hange Rate Res idu als 10 5 0 -5 -10 -15 01   02 03 04 05 06 07 08 39     Full sample SVAR Shocks - Brazil Y Residuals Inflation Residual s 4 2 2 1 0 0 -2 -1 -4 -6 -2 00 01 02 03 04 05 06 07 08 09 10 11 00 01 02 Poli cy Residuals 03 04 05 06 07 08 09 10 11 10 11 Expe cted Infla ti on Residua ls 1.5 3 1.0 2 0.5 1 0.0 0 -0.5 -1 -1.0 -2 -1.5 -3 00 01 02 03 04 05 06 07 08 09 10 11 09 10 11 00 01 02 03 04 05 06 07 08 09 Exchange Rate Residuals 20 10 0 -10 -20 00   01 02 03 04 05 06 07 08 40     Full sample SVAR Shocks - Mexico Y Residuals Inflation Residual s 2 1.2 1 0.8 0 0.4 -1 0.0 -2 -0.4 -3 -0.8 2004 2005 2006 2007 2008 2009 2010 2011 2004 2005 P olicy Re sidu als 2006 2007 2008 2009 2010 2011 Expected Infla ti on Residua ls .6 .4 .4 .2 .2 .0 .0 -.2 -.2 -.4 -.4 -.6 -.6 2004 2005 2006 2007 2008 2009 2010 2011 2010 2011 2004 2005 2006 2007 2008 2009 2010 2011 E xchang e Rate Residu als 8 4 0 -4 -8 -12 2004   2005 2006 2007 2008 2009 41     Impulse Response Functions Chile 2001:8 – 2008m9 Respons e to Cholesk y One S.D. Innovations – 2 S.E. Response of POL ICYNEW2 to Y Response of P OLICYNEW 2 to INFDEV .6 .6 .4 .4 .2 .2 .0 .0 -.2 -.2 -.4 -.4 2 4 6 8 10 12 14 16 18 2 Response of PO LICYNEW2 to EINFDEV 4 6 8 10 12 14 16 18 Respo nse of POLICYNEW2 to D(100*LOG(NE R)) .6 .6 .4 .4 .2 .2 .0 .0 -.2 -.2 -.4 -.4 2 4 6 8 10 12 14 16 18 2 4 6 8 10 12 14 16 18 Chile 2008m9 – 2011m12 Response to Cholesk y One S.D. Innovations – 2 S.E. Response of POLICYNEW2 to Y Response of POLICYNEW2 to INFDEV 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 -0.5 -0.5 -1.0 -1.0 2 4 6 8 10 12 14 16 18 2 Response of POLICYNEW2 to EINFDEV 6 8 10 12 14 16 18 Response of POLICYNEW2 to D(100*LOG(NER)) 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 -0.5 -0.5 -1.0 -1.0 2   4 4 6 8 10 12 14 16 18 2 42   4 6 8 10 12 14 16 18   Brazil 2000:7 – 2008m9 Brazil 2000:7-2008m9 Impulse Respons e Functions - One S.D. Innov ations – 2 S.E. Response of Policy to Y Response of Policy to Inflation 1.2 1.2 0.8 0.8 0.4 0.4 0.0 0.0 -0.4 -0.4 -0.8 -0.8 2 4 6 8 10 12 14 16 18 2 Response of Policy to Expected Inflation 4 6 8 10 12 14 16 18 Response of Policy to Exchange Rate 1.2 1.2 0.8 0.8 0.4 0.4 0.0 0.0 -0.4 -0.4 -0.8 -0.8 2 4 6 8 10 12 14 16 18 2 4 6 8 10 12 14 16 18 Brazil 2008m9 – 2011m12 Brazil 2008m9-2011m12 Impulse Response Functions - One S.D. Innovations – 2 S.E. Response of Policy to Y Response of Policy to Inflation 1.2 1.2 0.8 0.8 0.4 0.4 0.0 0.0 -0.4 -0.4 -0.8 -0.8 2 4 6 8 10 12 14 16 18 2 Response of Policy to Expected Inflation 6 8 10 12 14 16 18 Response of Policy to Exchange Rate 1.2 1.2 0.8 0.8 0.4 0.4 0.0 0.0 -0.4 -0.4 -0.8 -0.8 2   4 4 6 8 10 12 14 16 18 2 43   4 6 8 10 12 14 16 18   Mexico 2004:4 – 2008m9 Mexico 2004:4 - 2008m9 Impulse Response Functions - One S.D. Innovations – 2 S.E. Response of Policy to Y Response of Policy to In flation .8 .8 .6 .6 .4 .4 .2 .2 .0 .0 -.2 -.2 -.4 -.4 2 4 6 8 10 12 14 16 18 2 Re sponse of Policy to Expecte d Inflation 4 6 8 10 12 14 16 18 Respo nse of Policy to Exchange Ra te .8 .8 .6 .6 .4 .4 .2 .2 .0 .0 -.2 -.2 -.4 -.4 2 4 6 8 10 12 14 16 18 2 4 6 8 10 12 14 16 18 16 18 Mexico 2008m9 – 2011m12 Mexico 2008m9-2011m12 Impulse Response Functions - One S.D. Innovations – 2 S.E. Response of Policy to Y Response of Policy to In flation .4 .4 .3 .3 .2 .2 .1 .1 .0 .0 -.1 -.1 -.2 -.2 -.3 -.3 2 4 6 8 10 12 14 16 18 2 Re sponse of Policy to Expecte d Inflation 6 8 10 12 14 Respo nse of Policy to Exchange Ra te .4 .4 .3 .3 .2 .2 .1 .1 .0 .0 -.1 -.1 -.2 -.2 -.3 -.3 2   4 4 6 8 10 12 14 16 18 2 44   4 6 8 10 12 14 16 18   Table 2 - Full Sample Reaction Functions Dependent Variable: R CHILE BRAZIL MEXICO (2001:8 - 2011:07) (2001:1 - 2011:11) (2005:1 - 2011:12) (2.C) (3.C) (2.B) (3.B) (2.M) (3.M) (1.C) (1.B) (1.M) R-1 1.587*** 1.482*** 1.474*** 1.551*** 1.400*** 1.401*** 1.536*** 1.503*** 1.504*** (0.059) (0.066) (0.077) (0.077) (0.089) (0.089) (0.089) (0.059) (0.06) R -2 -0.732*** -0.761*** -0.753*** -0.620*** -0.480*** -0.482*** -0.619*** -0.585*** -0.585*** (0.051) (0.07) (0.073) (0.073) (0.082) (0.082) (0.082) (0.055) (0.057) Smoothing Coeff. 0.855 0.721 0.721 0.919 0.920 0.919 0.918 0.918 0.919 Output Gap 0.060*** 0.058*** 0.056*** 0.067*** 0.067*** 0.067*** 0.029*** 0.030*** 0.031*** (0.015) (0.015) (0.014) (0.022) (0.021) (0.022) (0.009) (0.01) (0.01) Inflation 0.041** 0.102 0.036** (0.016) -0.03 -0.02 Expected Inflation 0.515*** 0.102*** 0.102*** 0.098 0.098 0.530*** (0.096) (0.095) (0.028) (0.028) (0.059) (0.06) Long Term Inflation 0.283 1.900 1.846 1.259 1.275 1.259 0.439 1.195 1.210 Exchange Rate -0.012** -0.00191 0 0.283 (0.006) (0.006) (0.01) (0.005) Constant 0.013 -0.040 -0.03 -0.016 -0.016 -0.015 0.042 -0.01 -0.01 (0.018) (0.02) (0.02) (0.042) (0.034) (0.034) (0.009) (0.054) (0.055) adj R^2 0.982 0.984 0.984 0.972 0.974 0.973 0.972 0.974 0.972 Durbin-Watson 1.938 2 2.07 2.18 2.18 2.18 2.17 2.171 N 118 118 118 141 141 141 91 91 91 Note: Statistically significant * p < 0.1, ** p < 0.05, *** p < 0.01. Smoothing Coefficient is the summation of the coefficients for the lagged dependent variables Table 4 - Estimating a Reaction Function CHILE Dependent Variable: R BRAZIL MEXICO (2001:8 - 2008:8) (2008:9 - 2011:07) (2001:1 - 2008:9) (2008:9 - 2011:11) (2005:1 - 2008:9) (2008:9 - 2011:12) (2.C) (3.C) (2.B) (3.B) (3.M) (1.M) R -1 1.304*** 1.444*** 1.396*** 1.229*** 1.315*** 1.192*** (0.099) (0.077) (0.132) (0.148) (0.146) (0.122) R -2 -0.556*** -0.772*** -0.480*** -0.296** -0.416*** -0.386*** (0.089) (0.073) (0.137) (0.128) (0.124) (0.092) Smoothing Coeff. 0.748 0.668 0.916 0.933 0.899 0.806 Output Gap 0.018 0.085*** 0.1** 0.092*** 0.029*** 0.047*** (0.017) (0.029) (0.041) (0.026) (0.016) (0.013) Expected Inflation 0.589*** 0.615*** 0.097*** -0.012 0.382*** -0.01 (0.131) (0.029) (0.034) (0.028) (0.139) (0.072) Long Term Inflation 2.337 1.852 1.155 -0.179 3.782 -0.052 Exchange Rate -0.0084 -0.018 -0.0035 -0.001 0.007 -0.013** (0.006) (0.013) (0.007) (0.006) (0.13) (0.13) Constant -0.017 -0.037 -0.058 0.042** 0.23 -0.038* (0.019) (0.051) (0.47) (0.047) (0.009) (0.091) adj R^2 0.981 0.987 0.972 0.986 0.977 0.976 Durbin-Watson 2.065 1.914 2.19 2.226 2.114 2.21 Chow Test F-stat = 2.378; p-value = 0.034 F-stat =0.397 ; p-value = 0.879 F-stat = 4.41; p-value =0.001 N 84 35 107 39 54 40 Note: Statistically significant * p < 0.1, ** p < 0.05, *** p < 0.01. 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