Inflation Dynamics in the ABC (Argentina, Brazil and Chile) Countries

Córdoba

Congreso; XIX International Finance Conference; 2019

Universidad Nacional de Córdoba

This research analyses the inertia and persistence of headline and sectoral (food and beverage,clothing, health, education, transport, communication, housing, household and equipment, miscellaneousgoods and services, recreation and culture and hotels and restaurants) inflation for Argentina(two samples, 1995M1-2001M12 and 2005M10-2019M19), Brazil (1995M01-2019M04) and Chile(2009M12-2019M04). Up to now, inflation dynamics in Latin-America have been focused only onheadline or GDP-based inflation.Inflation dynamics are reflected by the best seasonal S-ARMA model, which is extended to anS-ARFIMA model when the fractional integrated coefficient is statistically significant. Measuringinertia by the sum of the autoregressive coefficients, there is evidence of: a) headline, clothing,health, housing and miscellaneous inertial inflation larger in Argentina (second sample) than in Chileand Brazil, b) inertial inflation of food and beverages (alcoholic and non-alcoholic) larger in Chilethan in Argentina (second sample) and Brazil, c) inertial inflation of education larger in Brazil than inChile, which in turn is larger than in Argentina (second sample), and d) household and equipmentinertial inflation larger in Chile than in Brazil and Argentina (second sample).Measuring persistence by the size of the fractionally integrated coefficient, our results suggest:a) long-memory or long-dependence (although stationary) of Brazilian headline, clothing and healthinflation, Chilean alcoholic beverages and tobacco inflation and Argentinean (second sample)household and equipment inflation, b) anti-persistence behaviour (the so-called Joseph effect, sinesweep adjustment process after a shock) of Brazilian household and equipment inflation, and c)persistence of miscellaneous goods and services sectoral inflation larger in Argentina (secondsample) than in Chile, which in turn is larger than Brazil.We show also that a) the quarter-life of headline inflation occurs in 20, 3 and 15 monthsin Argentina ( second sample), Brazil and Chile, while its half-life takes 29, 15 and 13 months,respectively, b) the quarter, half and full life of food and non-alcoholic beverages needs i) 13, 14 and37 months, respectively, in Argentina (second sample), ii) 24, 37 and over 100 periods, respectively,in Brazil, and iii) 13, 13 and 37 months, respectively, in Chile.