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Inflation persistence in the euro-area, US, and new members of the EU: Evidence from time-varying coefficient models

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Author Info
Zsolt Darvas (Corvinus University of Budapest)
Balázs Varga (Corvinus University of Budapest)

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Abstract

This paper studies inflation persistence with time-varying-coefficient autoregressions in response to recently discovered structural breaks in historical inflation time series of the euro-area and the US. To this end, we compare the statistical properties of the well known ML estimation using the Kalman-filter and the less known Flexible Least Squares estimator by Monte Carlo simulation. We also suggest a procedure for selecting the weight for FLS based on an iterative Monte Carlo simulation technique calibrated to the time series in question. We apply the methods for the study of inflation persistence of the US, the euro-area and the new members of the EU

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Publisher Info
Paper provided by Money Macro and Finance Research Group in its series Money Macro and Finance (MMF) Research Group Conference 2006 with number 137.

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Date of creation: 02 Feb 2007
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Handle: RePEc:mmf:mmfc06:137

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Related research
Keywords: flexible least squares; inflation persistence; Kalman-filter; time-varying coefficient models;

Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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This page was last updated on 2009-11-13.

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