Joint Research Program
XXII Meeting of the Central Bank Researchers Network

Inflation Expectations, Their Measurement
and the Estimate of Their Degree of Anchoring

Alexander Guarín
Luis Fernando Melo and
Eliana González



In 2005, CEMLA’s Board of Governors agreed to bolster economic research and collaboration among its membership through the establishment of research activities on topics of common interest. After a careful analysis of the best way to implement such a program, the heads of economic studies of the central banks on the Steering Committee of CEMLA’s Central Bank Research Network identified topics of interest and agreed that papers on these topics should be presented at the Network’s Annual Meetings and subsequently published. The terms of reference for the first joint research project were established in 2006, and the first Joint Research Program book was published in 2008, entitled Estimating and Using Unobservable Variables in the Region. 

Since then, research topics have been selected annually by the heads of economic studies at central banks within the Research Network Steering Committee, while representatives from the participating central banks have acted voluntarily as coordinators for each of these projects. Additional volumes have been published on topics such as inflationary dynamics, persistence, and prices and wages formation; domestic assets prices, global fundamentals, and financial stability; monetary policy and financial stability in Latin America and the Caribbean; international spillovers of monetary policy, and financial decisions of households and financial inclusion in Latin America and the Caribbean, among others.

All of the aforementioned subjects are of particular importance for the design and conduct of monetary policy and the preservation of financial stability. In its 2017 Meeting, the Research Network focused on a topic of particular interest for central banking, and whose importance has increased over recent years: that of the measurement of inflation expectations and their anchoring to an inflation target. One particular motive for this renewed interest was the shocks that affected inflation trends in the global economy in recent years, such as commodities price fluctuations and those associated with climate  change phenomena, among others.

As argued in the literature (an overview of it is offered in the Introduction to the present volume), inflation expectations and, in particular, their degree of anchoring, are fundamental for determining price evolution and volatility developments. Therefore, an accurate measurement of inflation expectations and a better understanding of their determinants are fundamental for the design of an effective monetary policy. Nevertheless, such a measurement is a challenging task, which has been approached through survey-based or model-based methods, including their inference from market prices of financial instruments. Moreover, there has been a lively debate among authorities and researchers about the potential links between policy decisions and agents’ expectations, and whether long-term expectations may be well-anchored.

The papers included in the present volume address these and other closely related topics (e.g. forecasts of inflation using novel techniques). They represent an effort by researchers of the central banks of Argentina, Bolivia, Brazil, Colombia, Costa Rica, Guatemala, Mexico, Paraguay, Peru, Spain, as well as researchers from CEMLA and the Bank for International Settlements (BIS), all of them coordinated by the Banco de la República (Colombia) with support provided by the Financial Stability Group of the Inter-American Development Bank.

We at CEMLA would like to thank the collaborators in this project, and hope that these documents serve as a showcase of the analysis carried out in the region and contribute towards the improvement of policy design related to the core activities of central banking in Latin America and the Caribbean.



About the Editors

Alexander Guarín

Currently, Alexander is senior researcher at Macroeconomics Modeling Department of Banco de la República. He studied Economics and did a master in Economic Sciences at Universidad Nacional de Colombia. He also obtained a master degree in Industrial Engineering from the Universidad de los Andes (Colombia) and earned a PhD in Computational Finance from the University of Essex (United Kingdom). His current research interests include the development and application of both numerical and econometric methods for the solution of problems in finance and macroeconomics. In particular, he is interested in meshfree computational methods and Bayesian econometrics. Some of his research works have been published in specialized scientific journals (for example, Journal of Economic, Dynamics and Control, European Journal of Operational Research, and Emerging Markets Review). <>.

Luis Fernando Melo

Statistician from Universidad Nacional of Colombia with a master’s degree in statistics from University of Michigan- Ann Arbor. He currently works as a Senior Econometrician in the Econometric Unit of Banco de la República. His research interests include Econometrics and time series applied to macroeconomic and finance. He is author of several papers published in the Journal of Development Economics, Applied Economics, Empirical Economics, Contemporary Economic Policy, Research in International Business and Finance, Economic Systems, International Finance, Finance Research Letters and Studies in Economics, and Finance, among others. <>.

Eliana González

Statistician from Universidad Nacional of Colombia with a master’s degree in Finance and Econometrics from University of London, Queen Mary College. She currently works as a Chief of Statistics division of Banco de la República. Her research areas of interests include Econometrics and time series applied to macroeconomic and finance. She is author of several working papers published in Borradores de Economía series of Banco de la República, besides she has published in some journals as the American Journal of Agricultural Economics and Money affairs, among others.


Inflation Expectations, Their Measurement and the Estimate of Their Degree of Anchoring


Alexander Guarín, Luis Fernando Melo and Eliana González


Formation and Measurement of Inflation Expectations

Extraction of Inflation Expectations from Financial Instruments
Alberto Fuertes, Ricardo Gimeno and José Manuel Marqués

The Information Rigidities and Rationality of Costa Rican Inflation Expectations
Alonso Alfaro Ureña and Aarón Mora Meléndez

Formation and Evolution of Inflation Expectations in Paraguay
Pablo Agustín Alonso Méndez


The Degree of Inflation Expectation Anchoring

Anchoring of Inflation Expectations in Latin America
Rocío Gondo and James Yetman

The Time-Varying Degree of Inflation Expectation Anchoring in Bolivia
Mauricio Mora Barrenechea, Juan Carlos Heredia Gómez and David Esteban Zeballos Coria

Expectations Anchoring Indexes for Brazil Using Kalman Filter: Exploring Signals of Inflation Anchoring in the Long Term
Fernando Nascimento de Oliveira and Wagner Piazza Gaglianone


Inflation Forecasting and Its Performance Evaluation

Forecasting Inflation in Argentina
Lorena Garegnani and Mauricio Gómez Aguirre

MIDAS Modeling for Core Inflation Forecasting
Luis Libonatti

Evaluation of Inflation Forecasting Models in Guatemala
Juan Carlos Castañeda-Fuentes, Carlos Eduardo Castillo-Maldonado,
Héctor Augusto Valle-Samayoa, Douglas Napoleón Galindo-Gonzáles,
Juan Carlos Catalán-Herrera, Guisela Hurtarte-Aguilar, Juan Carlos Arriaza-Herrera,
Edson Roger Ortiz-Cardona and Mariano José Gutiérrez-Morales

Forecasting Inflation Expectations from the CESifo World Economic Survey: An Empirical Application in Inflation Targeting Countries
Héctor M. Zárate Solano and Daniel R. Zapata Sanabria


Inflation Expectations and Its Relation with Economic Policy

Did the Introduction of Inflation Targeting Represent a Regime Switch of Monetary Policy in Latin America?
Sebastián Cadavid Sánchez and Alberto Ortiz Bolaños

Fiscal Policy and Inflation: Understanding the Role of Expectations in Mexico
Bernabe López Martin, Alberto Ramírez de Aguilar and Daniel Sámano