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Inflation persistence in the European Union, the euro area, and the United States

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  • Gadzinski, Gregory
  • Orlandi, Fabrice
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    Abstract

    In this paper we report results on inflation persistence using 79 inflation series covering the EU countries, the euro area and the US for five different inflation variables. The picture that emerges is one of moderate inflation persistence across the board. In particular we find euro area inflation persistence to be broadly in line with US inflation persistence. The issue of allowing for intercept dummies in the underlying inflation models is found to be of paramount importance to avoid overestimation of the level of persistence. The use of alternative measures of persistence is found to be commendable on the grounds that they complement each other in practice. JEL Classification: E31, E52, C22, C12

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    Bibliographic Info

    Paper provided by European Central Bank in its series Working Paper Series with number 0414.

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    Date of creation: Nov 2004
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    Handle: RePEc:ecb:ecbwps:20040414

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    Keywords: Inflation Dynamics; median unbiased estimates; Structural change;

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    1. Jeremy Berkowitz & Lutz Kilian, 1996. "Recent developments in bootstrapping time series," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 96-45, Board of Governors of the Federal Reserve System (U.S.).
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    4. Erceg, Christopher J. & Levin, Andrew T., 2003. "Imperfect credibility and inflation persistence," Journal of Monetary Economics, Elsevier, Elsevier, vol. 50(4), pages 915-944, May.
    5. Benati, Luca, 2008. "Investigating inflation persistence across monetary regimes," Working Paper Series, European Central Bank 0851, European Central Bank.
    6. Nicoletta Batini, 2006. "Euro area inflation persistence," Empirical Economics, Springer, Springer, vol. 31(4), pages 977-1002, November.
    7. Michael D. Bordo & Anna J. Schwartz, 1998. "Under What Circumstances, Past and Present, Have International Rescues of Countries in Financial Distress Been Successful?," NBER Working Papers 6824, National Bureau of Economic Research, Inc.
    8. Todd E. Clark, 2003. "Disaggregate evidence on the persistence of consumer price inflation," Research Working Paper, Federal Reserve Bank of Kansas City RWP 03-11, Federal Reserve Bank of Kansas City.
    9. 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.
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    Cited by:
    1. Gregoriou, Andros & Kontonikas, Alexandros, 2010. "The long-run relationship between stock prices and goods prices: New evidence from panel cointegration," Journal of International Financial Markets, Institutions and Money, Elsevier, Elsevier, vol. 20(2), pages 166-176, April.
    2. Canova, Fabio & Gambetti, Luca & Pappa, Evi, 2006. "The Structural Dynamics of Output Growth and Inflation: Some International Evidence," CEPR Discussion Papers 5878, C.E.P.R. Discussion Papers.
    3. Dias, Daniel A. & Marques, Carlos Robalo, 2010. "Using mean reversion as a measure of persistence," Economic Modelling, Elsevier, vol. 27(1), pages 262-273, January.
    4. Ivo J.M. Arnold & Jan J.G. Lemmen, 2008. "Inflation Expectations and Inflation Uncertainty in the Eurozone: Evidence from Survey Data," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 144(2), pages 325-346, July.
    5. Eijffinger, Sylvester C W & Hoogduin, Lex & van der Cruijsen, Carin A B, 2008. "Optimal Central Bank Transparency," CEPR Discussion Papers 6889, C.E.P.R. Discussion Papers.
    6. Migliardo, Carlo, 2012. "Heterogeneity in price setting behavior, spatial disparities and sectoral diversity: Evidence from a panel of Italian firms," Economic Modelling, Elsevier, vol. 29(4), pages 1106-1118.
    7. Belbute, José Manuel, 2013. "Is the Euro-Area core price index really more persistent than the food and energy price indexes?," Research in Economics, Elsevier, Elsevier, vol. 67(4), pages 307-315.
    8. Linda S. Goldberg & Michael W. Klein, 2007. "Establishing Credibility: Evolving Perceptions of the European Central Bank," The Institute for International Integration Studies Discussion Paper Series iiisdp194, IIIS.
    9. 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, Czech National Bank, Research Department 2007/10, Czech National Bank, Research Department.
    10. Andrea Vaona, 2008. "Inflation persistence, structural breaks and omitted variables: a critical view," Quaderni della facoltà di Scienze economiche dell'Università di Lugano, USI Università della Svizzera italiana 0802, USI Università della Svizzera italiana.
    11. Morana, Claudio, 2006. "A small scale macroeconometric model for the Euro-12 area," Economic Modelling, Elsevier, vol. 23(3), pages 391-426, May.
    12. O'Reilly, Gerard & Whelan, Karl, 2005. "Testing Parameter Stability: A Wild Bootstrap Approach," Research Technical Papers 8/RT/05, Central Bank of Ireland.

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