Regional inflation dynamics and inflation targeting. The case of PERU

Diego Winkelried, José Enrique Gutierrez

Producción científica: Contribución a una revistaArtículo de revista revisión exhaustiva

2 Citas (Scopus)


The Central Reserve Bank of Peru (BCRP) has been targeting inflation for more than a decade, using Lima's inflation as the operational measure. An alternative indicator is countrywide inflation, whose quality and real-time availability have improved substantially. Given these competing measures, two policy questions arise: What have been the implications for national inflation of targeting Lima's inflation? Would shifting to a national aggregate significantly affect the workings of monetary policy in Peru? To answer these questions, we estimate a large, but parsimonious, error correction model and investigate how regional shocks propagate across the country. The results indicate that a shock to Lima's inflation is transmitted fast and strongly elsewhere in the country, whereas the effects of shocks in other regions are limited and short-lived. This constitutes supporting evidence to the view that by targeting Lima's inflation, the BCRP has effectively, albeit indirectly, targeted national inflation.
Idioma originalInglés
Páginas (desde-hasta)199-224
Número de páginas26
PublicaciónJournal of Applied Economics
EstadoPublicada - 1 ene. 2015

Palabras clave

  • Error correction model
  • Inflation targeting
  • Regional inflation
  • Relative PPP


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