- 2
- Ball, L. (2011), The Performance of Alternative Monetary Regimes, in K. J. Arrow and M. D. Intriligator (eds.),Handbook of Monetary Economics, North-Holland, 1303-1343.

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- Prefix
- policy strategy for maintaining inflation at a relatively low and stable level without sacrificing long-term growth.1Nonetheless, it is still an open question whether countries that have adopted inflation-targeting regimes have lower inflation and better economic performance than countries that follow other monetary frameworks, see for example the research on macroeconomic performance in
- Exact
- Ball (2011), Ball and Sheridan (2005),
- Suffix
- Gon ̧calves and Salles (2002), and Brito and Bystedt (2010). Others have taken a different approach by looking for evidence on the extent to which inflation expectations are well anchored using survey and financial market data.

- In-text reference with the coordinate start=4018
- 3
- Ball, L. and N. Sheridan (2005), Does Inflation Targeting Matter?, in B. S. Bernanke and M. Woodford (eds.),The Inflation Targeting Debate, NBER Studies in Business Cycles, Vol. 32, University of Chicago Press, Chicago, IL.

Total in-text references: 1- In-text reference with the coordinate start=4018
- Prefix
- policy strategy for maintaining inflation at a relatively low and stable level without sacrificing long-term growth.1Nonetheless, it is still an open question whether countries that have adopted inflation-targeting regimes have lower inflation and better economic performance than countries that follow other monetary frameworks, see for example the research on macroeconomic performance in
- Exact
- Ball (2011), Ball and Sheridan (2005),
- Suffix
- Gon ̧calves and Salles (2002), and Brito and Bystedt (2010). Others have taken a different approach by looking for evidence on the extent to which inflation expectations are well anchored using survey and financial market data.

- In-text reference with the coordinate start=4018
- 4
- Batini, N. and D. Laxton (2006), Under What Conditions Can Inflation Targeting Be Adopted?

Total in-text references: 1- In-text reference with the coordinate start=7186
- Prefix
- Several years after the Bank of Mexico (BOM) adopted its inflation-targeting framework, it had continued to formally target a money aggregate and, unlike most other inflation-targeting central banks, did not publish its inflation forecasts, see
- Exact
- Batini and Laxton (2006).
- Suffix
- 2 Our approach is a blend of a formal and informal analysis. In our formal analysis, we follow the approach that was first used by G ̈urkaynak, Levin, Marder, and Swanson (2007a) by examining evidence from financial-market-derived measures of long-term inflation expectations.

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- 8
- BIS (2005), Zero-Coupon Yield Curves: Technical Documentation,Bank for International Settlements, Basel.

Total in-text references: 1- In-text reference with the coordinate start=29501
- Prefix
- zero-coupon yields at any given timetcan be well described by a smooth parametric 10In contrast, some developed economies, for example Germanyand Japan, while having extremely liquid nominal bond markets, still have much less developed inflation-linked bond markets, with only a small number of bonds outstanding at any given time. 11For example, the Bank of International Settlements,
- Exact
- (BIS, 2005),
- Suffix
- reports that nine out of the thirteen (predominantly European) central banks that report their zero-coupon curve estimates to the BIS use either the Nelson and Siegel (1987) model or an extension of it, the Svensson (1994) model, to construct zero-coupon yield curves. 8 function which is determined by just four parameters; yt(τ) =β1,t+β2,t 1−exp −τλt < +β3,t 1−exp −τλt < <−exp > − τ λt

- In-text reference with the coordinate start=29501
- 9
- Brito, R. D. and B. Bystedt (2010), Inflation Targeting in Emerging Economies: Panel Evidence, Journal of Development Economics,91, 198–210. Capistr ́an, C. and M. Ramos-Francia (2010), Does Inflation Targeting Affect the Dispersion of

Total in-text references: 1- In-text reference with the coordinate start=4091
- Prefix
- stable level without sacrificing long-term growth.1Nonetheless, it is still an open question whether countries that have adopted inflation-targeting regimes have lower inflation and better economic performance than countries that follow other monetary frameworks, see for example the research on macroeconomic performance in Ball (2011), Ball and Sheridan (2005),Gon ̧calves and Salles (2002), and
- Exact
- Brito and Bystedt (2010).
- Suffix
- Others have taken a different approach by looking for evidence on the extent to which inflation expectations are well anchored using survey and financial market data. Because of data limitations, however, most of the latter work has focused on the experience of industrialized countries.

- In-text reference with the coordinate start=4091
- 11
- Carstens, A. and A. Werner (1999), Mexico’s Monetary PolicyFramework under a Floating Exchange Rate Regime,Bank of Mexico Research.

Total in-text references: 1- In-text reference with the coordinate start=15553
- Prefix
- By 1998, the BOM’s monetary policy announcements could be seenas signaling the direction in which the central bank wanted interest rates to move (Ramos-Francia and Torres-Garc ́ıa, 2005). In 1999, BOM officials wrote that Mexico’s monetary policy framework was ”in a transition period towards a clear-cut inflation targeting scheme.”
- Exact
- (Carstens and Werner, 1999;
- Suffix
- cited in Mishkin and Savastano, 2001). The BOM formally adopted its inflation-targeting framework in 2001 and announced that the inflation target would be 3 percent beginning in 2003. Reflecting a growing consensus that central banks need to be free from political pressures to pursue short-term objectives, the central banks of Chileand Mexico had been granted legal autonomy with price stability as

- In-text reference with the coordinate start=15553
- 12
- Cook, R. D. and S. Weisberg (1982),Residuals and Influence in Regression, Chapman & Hall, London.

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- Prefix
- For Brazil we found outliers in the policy rate (the release of July 24, 2008), CPI (December 7, 2012), IP (March 6, 2009), and GDP (March 10, 2009). For Chile these were in the policy rate (December 11, 2003), CPI (January 6, 2009), trade balance (September 7, 2007), and the unemployment 25See
- Exact
- Cook and Weisberg (1982)
- Suffix
- for details and a general discussion on outlier detection. 15 rate (November 27, 2003). Finally, for Mexico, these were inCPI (May 7, 2010), PMI (August 3, 2011), retail sales (May 26, 2003), and GDP (August 16, 2005).

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- 13
- Diebold, F. X. and C. Li (2006), Forecasting the Term Structure of Government Bond Yields, Journal of Econometrics,130, 337–364.

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- Prefix
- These parameters can be interpreted as the level parameter,β1,t; the slope parameter, β2,t; and the curvature parameter,β3,t, judging from the effect that a change in each of these respective parameters has on the shape of the curve, see for example
- Exact
- Diebold and Li (2006).
- Suffix
- The fourth parameter,λt, is a shape parameter that influences the factor loadings associated with the slope and curvature parameters. We follow the approach of G ̈urkaynak, Sack, and Wright (2007b, 2010b) to estimate nominal and real zero-coupon curves fromobserved bond prices.

- In-text reference with the coordinate start=30264
- 15
- Fraga, A. (2009), Dez Anos de Metas para a Infla ̧c ̃ao,Central Bank of Brazil, 10 Years of Inflation Targets in Brazil 1999-2009 [in Portuguese].

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- Prefix
- At that moment, weimagined that such level would be, in a first step, something close to 3 to 4 percent (inspired by theChilean experience) and that, with time, we would go to a rate close to the world average”
- Exact
- (Fraga,2009,
- Suffix
- the translation is ours). After the Lula government took office, the inflation target wasset at 412percent in mid-2003 and the target has remained at that level since then. However, in 2004, CBB President Meirelles stated that he envisioned inflation falling to a long-term inflation target of 4 percent (Gomes, 2004).

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- 18
- Goldfajn, I. (2007), Eclyse e a meta de infla ̧c ̃ao,O Estado de S ̃ao Paulo, July 3.

Total in-text references: 1- In-text reference with the coordinate start=18853
- Prefix
- In mid-2007, in announcing the target for 2009, Finance Minister Guido Mantega stated that ”the inflation targets for 2008 and 2009 should be seen asa transition in the direction of a long-term inflation target that I judge appropriate to be in the neighborhood of 4 percent, given the characteristics of the Brazilian economy”
- Exact
- (Goldfajn, 2007,
- Suffix
- the translation is ours). Dilma Rousseff, Lula’s protege and successor, took office in January 2011, and appointed Alexandre Tombini as the new central bank president. In October 2012, Tombini stated that ”[w]e have to have the ambition of having inflation converge to [inflation] of our trading partners, as this, in the medium and long-term, would make a difference.

- In-text reference with the coordinate start=18853
- 19
- Gomes, W. (2004), Meirelles: transi ̧c ̃ao para meta de 4infla ̧c ̃ao ao ano ser ́a suave,O Globo Online, July 5. Gon ̧calves, C. E. S. and J. M. Salles (2002), Term Structure of Interest Rates with Regime Shifts, Journal of Finance,57, 1997–2043.

Total in-text references: 1- In-text reference with the coordinate start=18514
- Prefix
- After the Lula government took office, the inflation target wasset at 412percent in mid-2003 and the target has remained at that level since then. However, in 2004, CBB President Meirelles stated that he envisioned inflation falling to a long-term inflation target of 4 percent
- Exact
- (Gomes, 2004).
- Suffix
- In mid-2007, in announcing the target for 2009, Finance Minister Guido Mantega stated that ”the inflation targets for 2008 and 2009 should be seen asa transition in the direction of a long-term inflation target that I judge appropriate to be in the neighborhood of 4 percent, given the characteristics of the Brazilian economy” (Goldfajn, 2007, the translation is ours).

- In-text reference with the coordinate start=18514
- 20
- Grinbaum, R. (2012), Para BC, n ̃ao d ́a para baixar meta de infla ̧c ̃ao,O Estado de S ̃ao Paulo, October 24. 21 G ̈urkaynak, R. S., A. T. Levin, A. N. Marder, and E. T. Swanson(2007a), Inflatio

Total in-text references: 1- In-text reference with the coordinate start=19349
- Prefix
- In October 2012, Tombini stated that ”[w]e have to have the ambition of having inflation converge to [inflation] of our trading partners, as this, in the medium and long-term, would make a difference. Nonetheless, at the moment, we have to consolidate this level [referring to the 412percent inflation target].”
- Exact
- (Grinbaum, 2012,
- Suffix
- the translation is ours.). As we detail below, there is some evidence that uncertainty about the longer-term inflation goal has been feeding into survey and financial market-basedreadings on the longer-term inflation outlook for Brazil.

- In-text reference with the coordinate start=19349
- 25
- Hammond, G. (2012), State of the Art of Inflation Targeting,Centre for Central Banking Studies, Handbook - No. 29, Bank of England. H ̈ordahl, P. (2009), Disentangling the Drivers of Recent Shifts in Break-Even Inflation Rates,Bank of International Settlements Quarterly Review, March, 10–11. J.P. Morgan (2006),

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- Prefix
- However, there are also differences among the three with respect to institutional settings and in how their central banks explain to the public how they will strive to achieve the inflation goal. Chile, for example, had already achieved considerable success in macroeconomic stabilization in 1According to
- Exact
- Hammond (2012),
- Suffix
- 27 countries are considered tohave inflation-targeting frameworks: Armenia, Australia, Brazil, Canada, Chile, Colombia, the Czech Republic, Ghana, Guatemala, Hungary, Iceland, Indonesia, Israel, Korea, Mexico, New Zealand, Norway, Peru, the Philippines, Poland, Romania, Serbia, South Africa, Sweden, Thailand, Turkey, and the United Kingdom.

- In-text reference with the coordinate start=6330
- 28
- Mishkin, F. S. and M. Savastano (2001), Monetary Policy Strategies for Latin America,Journal of

Total in-text references: 1- In-text reference with the coordinate start=15590
- Prefix
- By 1998, the BOM’s monetary policy announcements could be seenas signaling the direction in which the central bank wanted interest rates to move (Ramos-Francia and Torres-Garc ́ıa, 2005). In 1999, BOM officials wrote that Mexico’s monetary policy framework was ”in a transition period towards a clear-cut inflation targeting scheme.” (Carstens and Werner, 1999; cited in
- Exact
- Mishkin and Savastano, 2001).
- Suffix
- The BOM formally adopted its inflation-targeting framework in 2001 and announced that the inflation target would be 3 percent beginning in 2003. Reflecting a growing consensus that central banks need to be free from political pressures to pursue short-term objectives, the central banks of Chileand Mexico had been granted legal autonomy with price stability as their primary mandate, Chile in 1990 a

- In-text reference with the coordinate start=15590
- 30
- Nelson, C. R. and A. F. Siegel (1987), Parsimonious ModelingOf Yield Curves,Journal of Business, 60, 473–489.

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- Prefix
- The now-outstanding spectrum of both nominal and real sovereign bonds allows us to construct nominal and real zero-coupon curves from these bonds, respectively. The zero curve estimation method we apply is that of
- Exact
- Nelson and Siegel (1987)
- Suffix
- which has increasingly become the workhorse method for estimating zero curves from bond prices.11 A zero-coupon yield curve consists of the collection of interest rates earned on non-couponpaying bonds with increasing maturities.

- In-text reference with the coordinate start=29023
- Prefix
- which has increasingly become the workhorse method for estimating zero curves from bond prices.11 A zero-coupon yield curve consists of the collection of interest rates earned on non-couponpaying bonds with increasing maturities. Because zero-coupon yields are not directly observable but are instead embedded in coupon-bearing bonds, we must resort to curve estimation techniques. Here we use the
- Exact
- Nelson and Siegel (1987)
- Suffix
- model. This model postulates that the curve of continuouslycompounded zero-coupon yields at any given timetcan be well described by a smooth parametric 10In contrast, some developed economies, for example Germanyand Japan, while having extremely liquid nominal bond markets, still have much less developed inflation-linked bond markets, with only a small number of bonds outstanding at any given time

- In-text reference with the coordinate start=29664
- Prefix
- , while having extremely liquid nominal bond markets, still have much less developed inflation-linked bond markets, with only a small number of bonds outstanding at any given time. 11For example, the Bank of International Settlements, (BIS, 2005), reports that nine out of the thirteen (predominantly European) central banks that report their zero-coupon curve estimates to the BIS use either the
- Exact
- Nelson and Siegel (1987)
- Suffix
- model or an extension of it, the Svensson (1994) model, to construct zero-coupon yield curves. 8 function which is determined by just four parameters; yt(τ) =β1,t+β2,t 1−exp −τλt < +β3,t 1−exp −τλt < <−exp > − τ λt (1) < τ λt τ λt whereyt(τ) is the model-impliedτ-period zero-coupon yield and{β1,t, β2,tβ3,t, λt}is the parameter vector.

- In-text reference with the coordinate start=28603
- 34
- Svensson, L. E. O. (1994), Estimating and Interpreting Forward Interest Rates: Sweden 1992-1994, NBER Working Paper Series,

Total in-text references: 2- In-text reference with the coordinate start=29721
- Prefix
- have much less developed inflation-linked bond markets, with only a small number of bonds outstanding at any given time. 11For example, the Bank of International Settlements, (BIS, 2005), reports that nine out of the thirteen (predominantly European) central banks that report their zero-coupon curve estimates to the BIS use either the Nelson and Siegel (1987) model or an extension of it, the
- Exact
- Svensson (1994)
- Suffix
- model, to construct zero-coupon yield curves. 8 function which is determined by just four parameters; yt(τ) =β1,t+β2,t 1−exp −τλt < +β3,t 1−exp −τλt < <−exp > − τ λt (1) < τ λt τ λt whereyt(τ) is the model-impliedτ-period zero-coupon yield and{β1,t, β2,tβ3,t, λt}is the parameter vector.

- In-text reference with the coordinate start=35343
- Prefix
- leave analyzing the effects of macroeconomic news surprises on the full term structure of forward inflation compensation, such as is done in Beecheyet al.(2011), for future research. 14For Morgan Markets, seehttps://mm.jpmorgan.com/. For PiP, seehttps://www.precios.com.mx/. 15G ̈urkaynak, Sack, and Wright (2007b) show that for estimating zero-coupon curves from U.S. Treasury bonds, one needs the
- Exact
- Svensson (1994)
- Suffix
- model to accurately fit bond prices in the very longest end of the curve. However, the Svensson model requires estimating additional parameterscompared with the Nelson and Siegel model. Therefore, due to the relatively small number of bond prices that we haveavailable for any given day in our sample, we only consider maturities of up to fifteen years.

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