Abstract

This paper examines inflationary adjustment processes in Argentina, Brazil,
Chile, Ecuador, Peru, and Uruguay with time-varying estimation techniques to determine the
relationship between inflationary inertia or feedback effects from past to current inflation
and the degree of indexation of wages and exchange rates to past inflation rates. The results
show that reductions in the degree of exchange rate linkage to past inflation have not been
particularly helpful in larger or relatively more diversified economies (such as Argentina,
Brazil, or Chile), while reductions in wage linkages to past inflation rates have had strong
but short-lived effects.

JEL Classification: F31; E31; J38.