José Manuel Marqués

On the Evolution of Relative Prices and Its Nature at the Regional Level: The Case of Spain

This paper studies the relevance and nature of shifts in relative prices at the regional level in Spain. Deviations in relative prices tend to be small (at most half a point of inflation annually) but persistent. They are determined by features intrinsic to deep economic integration, in particular, wage mechanisms operating at the national level. This is in stark contrast to evidence at the international level. Therefore, while acknowledging that divergent price evolutions are possible in the European Monetary Union, their nature will be different from those observed among Spanish regions. Copyright 2001 Blackwell Publishers

Extraction of Inflation Expectations from Financial Instruments

In this paper we estimate inflation expectations for several Latin American countries using an affine model that takes as factors the observed inflation and the parameters generated from zero-coupon yield curves of nominal bonds. By implementing this approach, we avoid the use of inflation-linked securities, which are scarce in many of these markets, and obtain market measures of inflation expectations free of any risk premium, eliminating potential biases included in other measures such as breakeven rates. Our method provides several advantages, as we can compute inflation expectations at any horizon and forward rates such as the expected inflation over the five year period that begins five years from today. We find that inflation expectations in the long-run are fairly anchored in Chile and Mexico, while those in Brazil and Colombia are more volatile and less anchored. We also find that expected inflation increases at longer horizons in Brazil and Chile, while it is decreasing in Colombia and Mexico.