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

Has Euro-Area Inflation Persistence Changed Over Time?

Contents:

Author Info

  • Gerard O'Reilly

    (Central Bank and Financial Services Authority of Ireland)

  • Karl Whelan

    (Central Bank and Financial Services Authority of Ireland)

Abstract

This paper analyzes the stability over time of the econometric process for euro-area inflation since 1970, focusing in particular on the behavior of the so-called persistence parameter (the sum of the coefficients on the lagged dependent variables). Perhaps surprisingly, in light of the Lucas critique, our principal finding is that there appears to be relatively little instability in the parameters of the euro-area inflation process. Full-sample estimates of the persistence parameter are generally close to 1, and we fail to reject the hypothesis that this parameter has been stable over time. We discuss how these results provide some indirect evidence against rational expectations models with strong forward-looking elements, such as the New Keynesian Phillips curve. © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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.mitpressjournals.org/doi/pdf/10.1162/003465305775098125
File Function: link to full text
Download Restriction: Access to full text is restricted to subscribers.

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 MIT Press in its journal Review of Economics and Statistics.

Volume (Year): 87 (2005)
Issue (Month): 4 (November)
Pages: 709-720

as in new window
Handle: RePEc:tpr:restat:v:87:y:2005:i:4:p:709-720

Contact details of provider:
Web page: http://mitpress.mit.edu/journals/

Order Information:
Web: http://mitpress.mit.edu/journal-home.tcl?issn=00346535

Related research

Keywords:

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. Carlos Robalo Marques, 2005. "Inflation persistence: facts or artefacts?," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department, Banco de Portugal, Economics and Research Department.
  2. Arturo Estrella & Jeffrey C. Fuhrer, 2003. "Monetary Policy Shifts and the Stability of Monetary Policy Models," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 85(1), pages 94-104, February.
  3. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, Elsevier, vol. 4(2), pages 103-124, April.
  4. Bruce E. Hansen, 1995. "Approximate Asymptotic P-Values for Structural Change Tests," Boston College Working Papers in Economics, Boston College Department of Economics 297., Boston College Department of Economics.
  5. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, Econometric Society, vol. 61(4), pages 821-56, July.
  6. Jeremy Rudd & Karl Whelan, 2001. "New tests of the New-Keynesian Phillips curve," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2001-30, Board of Governors of the Federal Reserve System (U.S.).
  7. Sargent, Thomas J, 1971. "A Note on the 'Accelerationist' Controversy," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 3(3), pages 721-25, August.
  8. Altissimo, Filippo & Corradi, Valentina, 2003. "Strong rules for detecting the number of breaks in a time series," Journal of Econometrics, Elsevier, Elsevier, vol. 117(2), pages 207-244, December.
  9. Jeremy Rudd & Karl Whelan, 2002. "Does the labor share of income drive inflation?," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2002-30, Board of Governors of the Federal Reserve System (U.S.).
  10. Andrews, Donald W K & Ploberger, Werner, 1994. "Optimal Tests When a Nuisance Parameter Is Present Only under the Alternative," Econometrica, Econometric Society, Econometric Society, vol. 62(6), pages 1383-1414, November.
  11. Bruce E. Hansen, 1998. "Testing for Structural Change in Conditional Models," Boston College Working Papers in Economics, Boston College Department of Economics 310., Boston College Department of Economics.
  12. Bruce E. Hansen, 1999. "The Grid Bootstrap And The Autoregressive Model," The Review of Economics and Statistics, MIT Press, MIT Press, vol. 81(4), pages 594-607, November.
  13. Roberts, John M, 1995. "New Keynesian Economics and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 27(4), pages 975-84, November.
  14. Vogelsang, Timothy J, 1998. "Testing for a Shift in Mean without Having to Estimate Serial-Correlation Parameters," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 16(1), pages 73-80, January.
  15. Clarida, R. & Gali, J. & Gertler, M., 1998. "Monetary Policy Rules and Macroeconomic Stability: Evidence and some Theory," Working Papers, C.V. Starr Center for Applied Economics, New York University 98-01, C.V. Starr Center for Applied Economics, New York University.
  16. Lucas, Robert Jr, 1976. "Econometric policy evaluation: A critique," Carnegie-Rochester Conference Series on Public Policy, Elsevier, Elsevier, vol. 1(1), pages 19-46, January.
  17. Andrew Levin & Jeremy Piger, 2003. "Is Inflation Persistence Intrinsic in Industrial Economies?," Computing in Economics and Finance 2003, Society for Computational Economics 298, Society for Computational Economics.
  18. Richard Clarida & Jordi Galí & Mark Gertler, 1997. "The science of monetary policy: A new Keynesian perspective," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 356, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 1999.
  19. Filippo Altissimo & Valentina Corradi, 2000. "Strong Rules for Detecting the Number of Breaks in a Time Series," Econometric Society World Congress 2000 Contributed Papers, Econometric Society 0574, Econometric Society.
  20. Andrews, Donald W K & Chen, Hong-Yuan, 1994. "Approximately Median-Unbiased Estimation of Autoregressive Models," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 12(2), pages 187-204, April.
  21. Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series, European Central Bank 0042, European Central Bank.
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:
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page.

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:tpr:restat:v:87:y:2005:i:4:p:709-720. 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: (Karie Kirkpatrick).

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.