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A Note on the Dynamics of Persistence in US Inflation

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  • Noriega Antonio E.
  • Ramos Francia Manuel

Abstract

Empirical research on the degree and stability of inflation persistence in the US has produced mixed results: some suggest high and unchanged persistence during the last few decades, while others argue in favor of a decline in persistence since the early 1980s. We contribute to this debate by applying a test specifically designed to test for multiple changes in persistence, allowing for consistent estimation of the possible change dates, and robust to level breaks. We show that post-WWII US inflation (monthly and quarterly) became highly persistent during the "Great Inflation" period, and then switched back to a low persistence process during 1984, and has remained stationary until the present day.

Suggested Citation

  • Noriega Antonio E. & Ramos Francia Manuel, 2008. "A Note on the Dynamics of Persistence in US Inflation," Working Papers 2008-12, Banco de México.
    • Handle: RePEc:bdm:wpaper:2008-12
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    References listed on IDEAS

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    1. Jean Boivin & Marc P. Giannoni, 2006. "Has Monetary Policy Become More Effective?," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 445-462, August.
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    4. María Dolores Gadea & Laura Mayoral, 2006. "The Persistence of Inflation in OECD Countries: A Fractionally Integrated Approach," International Journal of Central Banking, International Journal of Central Banking, vol. 2(1), March.
    5. Stephen J. Leybourne & Tae‐Hwan Kim & A. M. Robert Taylor, 2006. "Regression‐based Tests for a Change in Persistence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 68(5), pages 595-621, October.
    6. Nicoletta Batini & Edward Nelson, 2001. "The Lag from Monetary Policy Actions to Inflation: Friedman Revisited," International Finance, Wiley Blackwell, vol. 4(3), pages 381-400.
    7. Stephen Leybourne & Robert Taylor & Tae‐Hwan Kim, 2007. "CUSUM of Squares‐Based Tests for a Change in Persistence," Journal of Time Series Analysis, Wiley Blackwell, vol. 28(3), pages 408-433, May.
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    Cited by:

    1. Antonio Noriega & Carlos Capistrán & Manuel Ramos-Francia, 2013. "On the dynamics of inflation persistence around the world," Empirical Economics, Springer, vol. 44(3), pages 1243-1265, June.

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    More about this item

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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