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Measuring inflation persistence: a structural time series approach

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  • M. DOSSCHE

    ()

  • G. EVERAERT

    ()

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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Bibliographic Info

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
Date of revision:
Handle: RePEc:rug:rugwps:05/340

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Keywords: Inflation Target; State Space Model; Kalman Filter; Bayesian Analysis;

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