Simple intertemporal consumption theory implies that non-durable consumption is a random walk, but that consumption cointegrates with income and wealth. By the Granger representation theorem, there must be a (vector) error correction mechanism ((V)ECM) representation of the data; but from the...

Inflation targeting has been widely adopted in Latin America. In this paper, we show evidence consistent with major beneficial effects from so doing, with falling term premia and anchored policy rate expectations. To do this we construct term premia estimates using the method suggested by Adrian...