Testing nonlinearities between Brazilian exchange rate and inflation volatilities

Revista Brasileira de Economia

Christiane R. Albuquerque²  Marcelo S. Portugal¹ 

[1] ,Central Bank of placecountry-regionBrazil Research Department

关键词: Exchange rate;    inflation;    volatility;    Garch models;   

DOI  :  10.1590/S0034-71402006000400001

来源: SciELO

【 摘 要 】

There are few studies, directly addressing exchange rate and inflation volatilities, and lack of consensus among them. However, this kind of study is necessary, especially under an inflation-targeting system where the monetary authority must know well price behavior. This article analyses the relation between exchange rate and inflation volatilities using a bivariate GARCH model, and therefore modeling conditional volatilities, fact largely unexplored by the literature. We find a semi-concave relation between those series, and this nonlinearity may explain their apparently disconnection under a floating exchange rate system. The article also shows that traditional tests, with non-conditional volatilities, are not robust.

【 授权许可】

CC BY   
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