This article presents estimations of Phillips Curves for Brazil based on disaggregated price data with the use of three stage least squares estimation method. This approach alleviates the problem generated by the small amount of data available for the Brazilian economy while allowing a more detailed analysis of inflation dynamics. Regressions are performed with the use of the data on utilization of industrial capacity generated by FGV thus avoiding the usual problem of low significance of the estimated parameter for the output gap. Variations of the basic model are estimated to evaluate the different modeling choices adopted by the literature such as long run verticality and non-linear exchange rate pass-through coefficient. Also the impact of political instability in the second semester of 2002 is assessed. One of the results is that in general it is not possible to reject long-run verticality so that this is an apparently appropriate working hypothesis for the Brazilian economy.
Phillips Curve; three stage least squares; Brazilian economy
