Advanced Search
MyIDEAS: Login to save this article or follow this journal

Can the facts of UK inflation persistence be explained by nominal rigidity?

Contents:

Author Info

  • Meenagh, David
  • Minford, Patrick
  • Nowell, Eric
  • Sofat, Prakriti
  • Srinivasan, Naveen

Abstract

It has been widely argued that inflation persistence since WWII has been widespread and durable and that it can only be accounted for by models with a high degree of nominal rigidity. We examine UK post-war data where after confirming previous studies' findings of varying persistence due to changing monetary regimes, we find that models with little nominal rigidity are best equipped to explain it.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.sciencedirect.com/science/article/B6VB1-4W55T57-1/2/182f86919ae5874a7dc5a1732abec51f
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 26 (2009)
Issue (Month): 5 (September)
Pages: 978-992

as in new window
Handle: RePEc:eee:ecmode:v:26:y:2009:i:5:p:978-992

Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/30411

Related research

Keywords: Inflation persistence New Keynesian New Classical Nominal rigidity Monetary regime shifts;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Andrew T. Levin & Fabio M. Natalucci & Jeremy M. Piger, 2004. "The macroeconomic effects of inflation targeting," Review, Federal Reserve Bank of St. Louis, issue Jul, pages 51-80.
  2. Fuhrer, Jeff & Moore, George, 1995. "Inflation Persistence," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 127-59, February.
  3. Jeremy Rudd & Karl Whelan, 2001. "New tests of the New-Keynesian Phillips curve," Finance and Economics Discussion Series 2001-30, Board of Governors of the Federal Reserve System (U.S.).
  4. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "Monetary policy rules and macroeconomic stability: Evidence and some theory," Economics Working Papers 350, Department of Economics and Business, Universitat Pompeu Fabra, revised May 1999.
  5. Orphanides, Athanasios, 2003. "Monetary policy evaluation with noisy information," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 605-631, April.
  6. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Working Paper 0107, Federal Reserve Bank of Cleveland.
  7. Nelson, Edward & Nikolov, Kalin, 2004. "Monetary Policy and Stagflation in the UK," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(3), pages 293-318, June.
  8. Kim, Chang-Jin & Nelson, Charles R & Piger, Jeremy, 2004. "The Less-Volatile U.S. Economy: A Bayesian Investigation of Timing, Breadth, and Potential Explanations," Journal of Business & Economic Statistics, American Statistical Association, vol. 22(1), pages 80-93, January.
  9. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky information versus sticky prices: a proposal to replace the New-Keynesian Phillips curve," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  10. Le, Vo Phuong Mai & Minford, Patrick, 2006. "Joining the European Monetary Union - Comparing First and Second Generation Open Economy Models," CEPR Discussion Papers 5615, C.E.P.R. Discussion Papers.
  11. Vo Le & Patrick Minford, 2006. "Joining the European Monetary Union—Comparing First and Second Generation Open Economy Models," Open Economies Review, Springer, vol. 17(3), pages 281-296, July.
  12. Robert D. Dittmar & William T. Gavin & Finn E. Kydland, 2005. "Inflation Persistence And Flexible Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 245-261, 02.
  13. Bennett T. McCallum & Edward Nelson, . "An Optimizing IS-LM Specification for Monetary Policy and Business Cycle Analysis," GSIA Working Papers 1997-71, Carnegie Mellon University, Tepper School of Business.
  14. Laurence Ball, 1998. "Policy Rules for Open Economies," NBER Working Papers 6760, National Bureau of Economic Research, Inc.
  15. Peter N. Ireland, 1999. "A method for taking models to the data," Working Paper 9903, Federal Reserve Bank of Cleveland.
  16. Bennett T. McCallum & Edward Nelson, 2000. "Nominal Income Targeting in an Open-Economy Optimizing Model," NBER Working Papers 6675, National Bureau of Economic Research, Inc.
  17. Perron, Pierre, 1990. "Testing for a Unit Root in a Time Series with a Changing Mean," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 153-62, April.
  18. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July.
  19. Ireland, Peter N., 2000. "Expectations, Credibility, And Time-Consistent Monetary Policy," Macroeconomic Dynamics, Cambridge University Press, vol. 4(04), pages 448-466, December.
  20. Glenn D. Rudebusch & Lars E. O. Svensson, 1998. "Policy rules for inflation targeting," Working Papers in Applied Economic Theory 98-03, Federal Reserve Bank of San Francisco.
  21. Carlos Robalo Marques, 2005. "Inflation persistence: facts or artefacts?," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
  22. Nicoletta Batini & Andrew Haldane, 1999. "Forward-Looking Rules for Monetary Policy," NBER Chapters, in: Monetary Policy Rules, pages 157-202 National Bureau of Economic Research, Inc.
  23. Timothy Cogley & Thomas J. Sargent, 2002. "Evolving Post-World War II U.S. Inflation Dynamics," NBER Chapters, in: NBER Macroeconomics Annual 2001, Volume 16, pages 331-388 National Bureau of Economic Research, Inc.
  24. Laurence Ball, 2000. "Near-rationality and inflation in two monetary regimes," Proceedings, Federal Reserve Bank of San Francisco.
  25. Mark Gertler & John Leahy, 2006. "A Phillips curve with an Ss foundation," Working Papers 06-8, Federal Reserve Bank of Philadelphia.
  26. Peter N. Ireland, 2001. "Endogenous Money or Sticky Prices?," Boston College Working Papers in Economics 499, Boston College Department of Economics.
  27. Edward Nelson, 2007. "An overhaul of doctrine: the underpinning of U.K. inflation targeting," Working Papers 2007-026, Federal Reserve Bank of St. Louis.
  28. Jordi Galí & Mark Gertler & J. David López-Salido, 2001. "Robustness of the Estimates of the Hybrid New Keynesian Phillips Curve," Working Papers 44, Barcelona Graduate School of Economics.
  29. Bennett T. McCallum, 2001. "Should Monetary Policy Respond Strongly to Output Gaps?," NBER Working Papers 8226, National Bureau of Economic Research, Inc.
  30. Phillips, P C B, 1991. "To Criticize the Critics: An Objective Bayesian Analysis of Stochastic Trends," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(4), pages 333-64, Oct.-Dec..
  31. Bennett T. McCallum & Edward Nelson, 1998. "Performance of operational policy rules in an estimated semi-classical structural model," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  32. Taylor, John B., 2000. "Low inflation, pass-through, and the pricing power of firms," European Economic Review, Elsevier, vol. 44(7), pages 1389-1408, June.
  33. Gourieroux, C & Monfort, A & Renault, E, 1993. "Indirect Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S85-118, Suppl. De.
  34. John M. Roberts, 1998. "Inflation expectations and the transmission of monetary policy," Finance and Economics Discussion Series 1998-43, Board of Governors of the Federal Reserve System (U.S.).
  35. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 1(1), pages 19-46, January.
  36. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  37. Pivetta, Frederic & Reis, Ricardo, 2007. "The persistence of inflation in the United States," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1326-1358, April.
  38. Nelson, Edward, 2001. "What Does the UK's Monetary Policy and Inflation Experience Tell Us About the Transmission Mechanism?," CEPR Discussion Papers 3047, C.E.P.R. Discussion Papers.
  39. Jeffrey C. Fuhrer, 2000. "Habit Formation in Consumption and Its Implications for Monetary-Policy Models," American Economic Review, American Economic Association, vol. 90(3), pages 367-390, June.
  40. William Kerr & Robert G. King, 1996. "Limits on interest rate rules in the IS model," Economic Quarterly, Federal Reserve Bank of Richmond, issue Spr, pages 47-75.
  41. Zhongjun Qu & Pierre Perron, 2005. "Estimating and testing structural changes in multivariate regressions," Boston University - Department of Economics - Working Papers Series WP2005-012, Boston University - Department of Economics.
  42. Nicoletta Batini, 2006. "Euro area inflation persistence," Empirical Economics, Springer, vol. 31(4), pages 977-1002, November.
  43. Andrews, M J & Minford, A P L & Riley, J, 1996. "On Comparing Macroeconomic Models Using Forecast Encompassing Tests," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 58(2), pages 279-305, May.
  44. Smith, A A, Jr, 1993. "Estimating Nonlinear Time-Series Models Using Simulated Vector Autoregressions," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S63-84, Suppl. De.
  45. Michael Woodford, 2001. "Imperfect Common Knowledge and the Effects of Monetary Policy," NBER Working Papers 8673, National Bureau of Economic Research, Inc.
  46. Luca Benati, 2003. "Evolving Post-World War II U.K. Economic Performance," Computing in Economics and Finance 2003 171, Society for Computational Economics.
  47. Gregory, Allan W & Smith, Gregor W, 1991. "Calibration as Testing: Inference in Simulated Macroeconomic Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 9(3), pages 297-303, July.
  48. Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
  49. Andrews, Donald W K & Chen, Hong-Yuan, 1994. "Approximately Median-Unbiased Estimation of Autoregressive Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(2), pages 187-204, April.
  50. Robert Dittmar & William T. Gavin & Finn Kydland, 1999. "The inflation-output variability tradeoff and price-level targets," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 23-32.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Michael, Hatcher, 2013. "Indexed versus nominal government debt under inflation and price-level targeting," SIRE Discussion Papers 2013-56, Scottish Institute for Research in Economics (SIRE).
  2. Vo Phuong Mai Le & Patrick Minford & Michael Wickens, 2009. " The ‘Puzzles’ Methodology: En Route to Indirect Inference?," CDMA Conference Paper Series 0903, Centre for Dynamic Macroeconomic Analysis.
  3. Fan, Jingwen & Minford, Patrick, 2010. "Can the Fiscal Theory of the price level explain UK inflation in the 1970s?," CEPR Discussion Papers 7630, C.E.P.R. Discussion Papers.
  4. Minford, Patrick & Ou, Zhirong, 2013. "Taylor Rule or optimal timeless policy? Reconsidering the Fed's behavior since 1982," Economic Modelling, Elsevier, vol. 32(C), pages 113-123.
  5. Fan, Jingwen & Minford, Patrick & Ou, Zhirong, 2013. "The Fiscal Theory of the Price Level - identification and testing for the UK in the 1970s," Cardiff Economics Working Papers E2013/12, Cardiff University, Cardiff Business School, Economics Section.
  6. Naveen Srinivasan & Pankaj Kumar, 2012. "Inflation Persistence: Does Credibility of the Monetary Regime Matter?," Economics Bulletin, AccessEcon, vol. 32(4), pages 2944-2954.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:26:y:2009:i:5:p:978-992. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.