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Has the inflation process changed?

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Author Info
Stephen G. Cecchetti
Guy Debelle

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Abstract

"Inflation has been low in many countries for at least a decade. But have inflation processes changed in ways that would help make low inflation permanent? Using both aggregate and disaggregated inflation data, we find that the means of inflation processes have become smaller over the past two decades and that, allowing for these changes in the mean, their persistence has not declined much. Changes in monetary policy frameworks and recessions appear to have contributed to a reduction in the mean of inflation, but do not appear to have a meaningful impact on persistence, and there is some evidence that the shifts in inflation expectations are the proximate cause of the changes in the mean of inflation. These findings suggest that policy-makers should focus on maintaining credibility and carefully monitoring inflation expectations for any indication that they are rising." Copyright CEPR, CES, MSH, 2006.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-0327.2006.00160.x
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Publisher Info
Article provided by CEPR, CES, MSH in its journal Economic Policy.

Volume (Year): 21 (2006)
Issue (Month): 46 (04)
Pages: 311-352
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Handle: RePEc:bla:ecpoli:v:21:y:2006:i:46:p:311-352

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  1. Sebastian Dullien & Ulrich Fritsche, 2007. "Does the Dispersion of Unit Labor Cost Dynamics in the EMU Imply Long-Run Divergence?: Results from a Comparison with the United States of America and Germany," Discussion Papers of DIW Berlin 674, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  2. Jamie Armour, 2006. "An Evaluation of Core Inflation Measures," Working Papers 06-10, Bank of Canada. [Downloadable!]
  3. Laurent Bilke, 2005. "Break in the mean and persistence of inflation - a sectoral analysis of French CPI," Working Paper Series 463, European Central Bank. [Downloadable!]
  4. Patrick Lünnemann & Thomas Y. Mathä, 2005. "Nominal rigidities and inflation persistence in Luxembourg: a comparison with EU 15 member countries with particular focus on services and regulated prices," BCL working papers 14, Central Bank of Luxembourg. [Downloadable!]
  5. Markku Lanne & Pentti Saikkonen, 2008. "Modeling Expectations with Noncausal Autoregressions," Economics Working Papers ECO2008/20, European University Institute. [Downloadable!]
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  6. Filippo Altissimo & Benoît Mojon & Paolo Zaffaroni, 2007. "Fast micro und slow macro: can aggregation explain the persistence of inflation?," Working Paper Series 729, European Central Bank. [Downloadable!]
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  7. Andreea Halunga & Denise Osborn & Marianne Sensier, 2007. "Changes in the order of integration of US and UK inflation," The School of Economics Discussion Paper Series 0715, Economics, The University of Manchester. [Downloadable!]
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  8. Michal Franta & Branislav Saxa & Katerina Smidkova, 2007. "Inflation Persistence in New EU Member States: Is It Different Than in the Euro Area Members?," Working Papers 2007/10, Czech National Bank, Research Department. [Downloadable!]
  9. Stephen G. Cecchetti & Stefan Krause, 2006. "Inflation Targeting versus Price-Path Targeting: Looking For Improvements," Working Papers Central Bank of Chile 399, Central Bank of Chile. [Downloadable!]
  10. Bernard Hodgetts, 2006. "Changes in the inflation process in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 69, pages 30p., March. [Downloadable!]
  11. Dieter Gerdesmeier & Francesco Paolo Mongelli & Barbara Roffia, 2007. "The Eurosystem, the US Federal Reserve and the Bank of Japan - similarities and differences," Working Paper Series 742, European Central Bank. [Downloadable!]
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  12. Jan Babecky & Oxana Babetskaia-Kukharchuk & Kamil Galuscak & Dana Hajkova & Jaroslav Hermanek & Tomas Holub & Roman Horvath & Petr Jakubik & Lubos Komarek & Zlatuse Komarkova & Petr Kral & Filip Novot, 2008. "Analyses of the Czech Republic's Current Economic Alignment with the Euro Area 2008," Occasional Publications - Edited Volumes, Czech National Bank, Research Department, number as08 edited by Dana Hajkova. [Downloadable!]
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  13. Alberto Musso & Livio Stracca & Dick van Dijk, 2007. "Instability and nonlinearity in the Euro area Phillips curve," Working Paper Series 811, European Central Bank. [Downloadable!]
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  14. Sandrine Corvoisier & Benoît Mojon, 2005. "Breaks in the mean of inflation - how they happen and what to do with them," Working Paper Series 451, European Central Bank. [Downloadable!]
  15. Denise Osborn & Marianne Sensier, 2007. "UK inflation: persistance, seasonality and monetary policy," The School of Economics Discussion Paper Series 0716, Economics, The University of Manchester. [Downloadable!]
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  16. Ian Babetskii & Fabrizio Coricelli & Roman Horváth, 2007. "Measuring and Explaining Inflation Persistence: Disaggregate Evidence on the Czech Republic," Working Papers IES 2007/22, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Aug 2007. [Downloadable!]
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  17. Ivan Roberts, 2005. "Underlying Inflation: Concepts, Measurement and Performance," RBA Research Discussion Papers rdp2005-05, Reserve Bank of Australia. [Downloadable!]
  18. Ulrich Fritsche & Vladimir Kuzin, 2007. "Unit Labor Cost Growth Differentials in the Euro Area, Germany, and the US: Lessons from PANIC and Cluster Analysis," Discussion Papers of DIW Berlin 667, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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  19. Patrick Lünnemann & Thomas Y. Mathä, 2005. "Regulated and services’ prices and inflation persistence," Working Paper Series 466, European Central Bank. [Downloadable!]
  20. Lanne, Markku & Saikkonen, Pentti, 2009. "Noncausal vector autoregression," Research Discussion Papers 18/2009, Bank of Finland. [Downloadable!]
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