Inflation surprises across developed and emerging economies

Detalhes bibliográficos
Autor(a) principal: Pacheco, André Sanchez
Data de Publicação: 2023
Tipo de documento: Artigo
Idioma: eng
Título da fonte: Repositório Institucional do FGV (FGV Repositório Digital)
Texto Completo: https://hdl.handle.net/10438/34373
Resumo: I construct a novel data-set containing monthly inflation surprises for a set of developed and emerging economies. These data are used in a panel setting to analyze the relationship between inflation surprises and changes in short- and long-term interest rates as well as exchange rates on CPI release days. I find that a 1% upward surprise in monthly inflation is associated with (1) a +7.4bps daily change in the two-year benchmark interest rate; (2) a +5.1bps daily change in the ten-year rate and (3) an appreciation in the domestic exchange rate relative to the U.S. Dollar. Such sensitivities are heterogeneous across country groups. Interest rates in emerging economies are more sensitive to inflation surprises than those in developed markets. In contrast, exchange rates in emerging markets appear to be less sensitive to such surprises relative to developed counterparts.
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spelling Pacheco, André SanchezEscolas::EESP2023-10-17T14:32:28Z2023-10-17T14:32:28ZTD 566https://hdl.handle.net/10438/34373I construct a novel data-set containing monthly inflation surprises for a set of developed and emerging economies. These data are used in a panel setting to analyze the relationship between inflation surprises and changes in short- and long-term interest rates as well as exchange rates on CPI release days. I find that a 1% upward surprise in monthly inflation is associated with (1) a +7.4bps daily change in the two-year benchmark interest rate; (2) a +5.1bps daily change in the ten-year rate and (3) an appreciation in the domestic exchange rate relative to the U.S. Dollar. Such sensitivities are heterogeneous across country groups. Interest rates in emerging economies are more sensitive to inflation surprises than those in developed markets. In contrast, exchange rates in emerging markets appear to be less sensitive to such surprises relative to developed counterparts.engEscola de Economia de São Paulo da Fundação Getulio Vargas (FGV-EESP)Textos para Discussão / Working Paper Series;TD 566Inflation surprisesYield curveInterest ratesExchange ratesEconomiaInflaçãoTaxas de câmbioDesenvolvimento econômicoInflation surprises across developed and emerging economiesinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleinfo:eu-repo/semantics/openAccessreponame:Repositório Institucional do FGV (FGV Repositório Digital)instname:Fundação Getulio Vargas (FGV)instacron:FGVLICENSElicense.txtlicense.txttext/plain; charset=utf-84707https://repositorio.fgv.br/bitstreams/ff7e3398-4749-4c54-bfc1-4ad6da5da367/downloaddfb340242cced38a6cca06c627998fa1MD52ORIGINALTD 566 - André Sanchez Pacheco.pdfTD 566 - André Sanchez 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dc.title.eng.fl_str_mv Inflation surprises across developed and emerging economies
title Inflation surprises across developed and emerging economies
spellingShingle Inflation surprises across developed and emerging economies
Pacheco, André Sanchez
Inflation surprises
Yield curve
Interest rates
Exchange rates
Economia
Inflação
Taxas de câmbio
Desenvolvimento econômico
title_short Inflation surprises across developed and emerging economies
title_full Inflation surprises across developed and emerging economies
title_fullStr Inflation surprises across developed and emerging economies
title_full_unstemmed Inflation surprises across developed and emerging economies
title_sort Inflation surprises across developed and emerging economies
author Pacheco, André Sanchez
author_facet Pacheco, André Sanchez
author_role author
dc.contributor.unidadefgv.por.fl_str_mv Escolas::EESP
dc.contributor.author.fl_str_mv Pacheco, André Sanchez
dc.subject.eng.fl_str_mv Inflation surprises
Yield curve
Interest rates
Exchange rates
topic Inflation surprises
Yield curve
Interest rates
Exchange rates
Economia
Inflação
Taxas de câmbio
Desenvolvimento econômico
dc.subject.area.por.fl_str_mv Economia
dc.subject.bibliodata.por.fl_str_mv Inflação
Taxas de câmbio
Desenvolvimento econômico
description I construct a novel data-set containing monthly inflation surprises for a set of developed and emerging economies. These data are used in a panel setting to analyze the relationship between inflation surprises and changes in short- and long-term interest rates as well as exchange rates on CPI release days. I find that a 1% upward surprise in monthly inflation is associated with (1) a +7.4bps daily change in the two-year benchmark interest rate; (2) a +5.1bps daily change in the ten-year rate and (3) an appreciation in the domestic exchange rate relative to the U.S. Dollar. Such sensitivities are heterogeneous across country groups. Interest rates in emerging economies are more sensitive to inflation surprises than those in developed markets. In contrast, exchange rates in emerging markets appear to be less sensitive to such surprises relative to developed counterparts.
publishDate 2023
dc.date.accessioned.fl_str_mv 2023-10-17T14:32:28Z
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dc.language.iso.fl_str_mv eng
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dc.publisher.none.fl_str_mv Escola de Economia de São Paulo da Fundação Getulio Vargas (FGV-EESP)
publisher.none.fl_str_mv Escola de Economia de São Paulo da Fundação Getulio Vargas (FGV-EESP)
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