Inflação e incerteza inflacionária no Brasil

Abstract

This paper studies the relationship between the level of inflation and inflation uncertainty in Brazil. This variable is obtained through two different methods. In the first one, inflation uncertainty is estimated with GARCH models. In the second one, inflation uncertainty is identified as the standard deviation of inflation expectations. Granger causality tests show that causality runs in both ways between inflation uncertainty and inflation. The results show that inflation uncertainty is positively correlated with current inflation, and Granger-causes the permanent component of inflation (core inflation), when measured by the standard deviation of inflation expectations