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Measuring inflation persistence: a structural time series approach

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Author Info
M. DOSSCHE ()
G. EVERAERT ()

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Abstract

Using a structural time series approach we measure different sorts of inflation persistence allowing for an unobserved time-varying inflation target. Unobserved components are identified using Kalman filtering and smoothing techniques. Posterior densities of the model parameters and the unobserved components are obtained in a Bayesian framework based on importance sampling. We find that inflation persistence, expressed by the half life of a shock, can range from 1 quarter in case of a cost-push shock to several years for a shock to long-run inflation expectations or the output gap.

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Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 05/340.

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Length: 42 pages
Date of creation: Nov 2005
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Handle: RePEc:rug:rugwps:05/340

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Related research
Keywords: Inflation Target State Space Model Kalman Filter Bayesian Analysis

Other versions of this item:

Find related papers by JEL classification:
C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Bayesian Analysis
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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Full references

Cited by:
(explanations, 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.)

  1. Johan Devriese & Janet Mitchell, 2005. "Liquidity risk in securities settlement," Research series 200507-2, National Bank of Belgium. [Downloadable!]
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  2. Nancy Masschelein, 2007. "Monitoring pro-cyclicality under the capital requirements directive : preliminary concepts for developing a framework," Documents series 200711-22, National Bank of Belgium. [Downloadable!]
  3. Alonso Gomez & John M Maheu & Alex Maynard, 2008. "Improving Forecasts of Inflation using the Term Structure of Interest Rates," Working Papers tecipa-319, University of Toronto, Department of Economics. [Downloadable!]
  4. 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 2007/10, Czech National Bank, Research Department. [Downloadable!]
  5. Gianni Amisano & Oreste Tristani, 2007. "Euro area inflation persistence in an estimated nonlinear DSGE model," Working Paper Series 754, European Central Bank. [Downloadable!]
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  6. Carine Swartenbroekx, 2007. "The gas chain : influence of its specificities on the liberalisation process," Documents series 200711-24, National Bank of Belgium. [Downloadable!]
  7. Janet Mitchell, 2005. "Financial intermediation theory and implications for the sources of value in structured finance markets," Documents series 200507-1, National Bank of Belgium. [Downloadable!]
  8. Annick Bruggeman, 2007. "Can Excess Liquidity Signal an Asset Price Boom?," Research series 200708-08, National Bank of Belgium. [Downloadable!]
  9. James H. Stock & Mark W. Watson, 2006. "Why Has U.S. Inflation Become Harder to Forecast?," NBER Working Papers 12324, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. François Coppens & Fernando Gonzáles & Gerhard Winkler, 2007. "The performance of credit rating systems in the assessment of collateral used in Eurosystem monetary policy operations," Research series 200710-12, National Bank of Belgium. [Downloadable!]
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  11. Frédéric Lagneaux, 2005. "Importance économique du Port Autonome de Liège: rapport 2003," Documents series 200510-1, National Bank of Belgium. [Downloadable!]
  12. Harvey, A., 2008. "Modeling the Phillips curve with unobserved components," Cambridge Working Papers in Economics 0805, Faculty of Economics, University of Cambridge. [Downloadable!]
  13. Helga De Doncker, 2006. "Crédits aux particuliers - Analyse des données de la Centrale des Crédits aux Particuliers," Documents series 200601-1, National Bank of Belgium. [Downloadable!]
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