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Modelling UK Inflation: Persistence, Seasonality and Monetary Policy

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  • D R Osborn
  • M Sensier

Abstract

This paper studies monthly RPIX inflation in the UK in the context of the change to inflation targeting in 1992. Our empirical models take account of the strong and changing seasonal pattern of inflation, while also focusing on inflation persistence and Phillips curve explanations. In both univariate and Phillips curve models, we find strong evidence of a change in parameters around the end of 1992, at the time of the introduction of inflation targeting. All models point to a substantial decline in inflation persistence after this date.

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File URL: http://www.socialsciences.manchester.ac.uk/medialibrary/cgbcr/discussionpapers/dpcgbcr46.pdf
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Bibliographic Info

Paper provided by Economics, The Univeristy of Manchester in its series Centre for Growth and Business Cycle Research Discussion Paper Series with number 46.

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Length: 31 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:man:cgbcrp:46

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Web page: http://www.socialsciences.manchester.ac.uk/subjects/economics/our-research/centre-for-growth-and-business-cycle-research/
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  1. Jordi Galí & Mark Gertler & J. David López-Salido, 2000. "European Inflation Dynamics," Banco de Espa�a Working Papers 0020, Banco de Espa�a.
  2. Jordi Gali & Mark Gertler, 2000. "Inflation Dynamics: A Structural Econometric Analysis," NBER Working Papers 7551, National Bureau of Economic Research, Inc.
  3. A Matas-Mir & D R Osborn, 2001. "Does Seasonality Change Over the Business Cycle? An Investigation Using Monthly Industrial Production Series," The School of Economics Discussion Paper Series 0110, Economics, The University of Manchester.
  4. Sensier, Marianne & Osborn, Denise R & Ocal, Nadir, 2002. " Asymmetric Interest Rate Effects for the UK Real Economy," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 64(4), pages 315-39, September.
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  6. Michael P. Clements & Marianne Sensier, 2003. "Asymmetric output-gap effects in Phillips Curve and mark-up pricing models: Evidence for the US and the UK," Scottish Journal of Political Economy, Scottish Economic Society, vol. 50(4), pages 359-374, 09.
  7. Jeff Fuhrer & George Moore, 1993. "Inflation persistence," Proceedings, Board of Governors of the Federal Reserve System (U.S.).
  8. Lundbergh, Stefan & Terasvirta, Timo & van Dijk, Dick, 2003. "Time-Varying Smooth Transition Autoregressive Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 21(1), pages 104-21, January.
  9. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Harvard Institute of Economic Research Working Papers 1922, Harvard - Institute of Economic Research.
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Cited by:
  1. Luca Benati, 2006. "UK monetary regimes and macroeconomic stylised facts," Bank of England working papers 290, Bank of England.
  2. Halunga, Andreea G. & Osborn, Denise R. & Sensier, Marianne, 2009. "Changes in the order of integration of US and UK inflation," Economics Letters, Elsevier, vol. 102(1), pages 30-32, January.
  3. Mumtaz, Haroon, 2010. "Evolving UK macroeconomic dynamics: a time-varying factor augmented VAR," Bank of England working papers 386, Bank of England.

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