Browsing by Author "Mora-Melendez, Aaron"
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- The Information Rigidities and Rationality of Costa Rican Inflation ExpectationsCosta Rican inflation expectations cannot be characterized as rational under any existing definition of the term. They cannot be categorized as adaptive either, since in addition to historical data on inflation, other macroeconomic variables are important in explaining inflation expectations. Instead, the sticky information model is considered a more sophisticated framework to assess inflation expectations of Costa Rican agents. Results are based on the Monthly Survey of Inflation and Exchange Rate Expectations elaborated and published by the Banco Central de Costa Rica. This paper gathers inconclusive evidence that the expectations from this survey are subject to information rigidities. However, this paper shows how a simulated survey, based on a sticky information model, is capable of replicating features from the observed survey.