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Break in the Mean and Persistence of Inflation: a Sectoral Analysis of French CPI

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  • Bilke, L.
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    Abstract

    This paper uses disaggregated CPI time series to show that a break in the mean of French inflation occurred in the mid-eighties and that the 1983 monetary policy shift mostly accounted for it. CPI average yearly growth declined from nearly 11% before the break date (May 1985) to 2.1% after. No other break in the 1973-2004 sample period can be found. Controlling for this mean break, both aggregate and sectoral inflation persistence are stable and low, with the unit root lying far in the tail of the persistence estimates. However, persistence differs dramatically across sectors. Finally, the duration between two price changes (at the firm level) appears positively related with inflation persistence (at the aggregate level).

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    File URL: http://www.banque-france.fr/uploads/tx_bdfdocumentstravail/ner122.pdf
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    Bibliographic Info

    Paper provided by Banque de France in its series Working papers with number 122.

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    Length: 43 pages
    Date of creation: 2005
    Date of revision:
    Handle: RePEc:bfr:banfra:122

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    Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
    Web page: http://www.banque-france.fr/
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    Related research

    Keywords: Multiple breaks test ; Inflation persistence ; Monetary policy; sectoral prices;

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