Brazilian paper charts impact of inflation signal on expectations
Agents update forecasts immediately after new information is released
An agent's reaction to new inflation information depends on the "distance" between the signal and their existing expectations, a working paper published by the central bank of Brazil has suggested.
In New Information and Updating of Market Experts' Inflation Expectations, Arnildo da Silva Correa and Paulo Picchetti use the release of a signal about the inflation rate to identify its effect on the forecasts of 100 professionals.
Their results indicate agents update their expectations immediately
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