Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/195218
Authors: 
Blak, Andrew P.
Rule, Garreth R.
Rummel, Ole J.
Year of Publication: 
2015
Citation: 
[Journal:] Latin American Economic Review [ISSN:] 2196-436X [Volume:] 24 [Year:] 2015 [Issue:] 3 [Pages:] 1-21
Abstract: 
Inflation targeting has been widely adopted in Latin America. In this paper, we show evidence consistent with major beneficial effects from so doing, with falling term premia and anchored policy rate expectations. To do this we construct term premia estimates using the method suggested by Adrian et al. (2013) for selected inflation targeting Latin American economies. They use synthetic prices constructed from estimated yield curves to derive holding-period excess returns and condition on the principal components of the yields. This approach is extremely easy to implement and fast to calculate. We detect a small drop in interest rate expectations since the global financial crisis but longer term rates seem remarkably well anchored. There is also relatively low correlation between our estimated Latin American and US term premia.
Subjects: 
Inflation targeting
Term premia
Affine term structure model
JEL: 
E43
E58
G12
G17
Persistent Identifier of the first edition: 
Creative Commons License: 
https://creativecommons.org/licenses/by/4.0/
Document Type: 
Article
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