Inertial inflation, indexation and price stickiness: evidence from Brazil

In: Journal of development economics, Band 60, Heft 2, S. 407-421

Abstract

This paper evaluates the inertial hypothesis for Brazil which posits that indexation created a feedback mechanism such that one-time supply shocks were fully transmitted into permanent changes in inflation. A theoretical model is used to show that this outcome is based on the assumption of perfect price flexibility. (DSE/DÜI)