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Inflation Persistence

In: Handbook of Monetary Economics

  • Fuhrer, Jeffrey C.

This chapter examines the concept of inflation persistence in macroeconomic theory. It begins by defining persistence -- emphasizing the difference between reduced-form and structural persistence. It then examines a number of empirical measures of reduced-form persistence, considering the possibility that persistence may have changed over time. The chapter then examines the theoretical sources of persistence, distinguishing "intrinsic" from "inherited" persistence, and deriving a number of analytical results on persistence, emphasizing the influence of the monetary policy regime. It summarizes the implications for persistence from the literature on imperfect information models, learning models, and so-called "trend inflation models," providing some new results throughout. Finally, it summarizes the results on persistence from the many studies of disaggregated price data.

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This chapter was published in:
  • Benjamin M. Friedman & Michael Woodford (ed.), 2010. "Handbook of Monetary Economics," Handbook of Monetary Economics, Elsevier, edition 1, volume 3, number 3, January.
  • This item is provided by Elsevier in its series Handbook of Monetary Economics with number 3-09.
    Handle: RePEc:eee:monchp:3-09
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description

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