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Inflation Persistence during Periods of Structural Change: An Assessment Using Greek Data

Listed author(s):
  • George Hondroyiannis

    ()

    (Bank of Greece, Economic Research Department)

  • Sophia Lazaretou

    (Bank of Greece, Economic Research Department)

The paper estimates inflation persistence in Greece from 1975 to 2003, a period of high variation in inflation and changes in policy regimes. Three empirical methodologies, univariate autoregressive (AR) modelling, second-generation random coefficient (RC) modelling, and vector autoregressive (VAR) modelling, are employed to estimate inflation persistence. The empirical results from all the procedures suggest that inflation persistence was high during the inflationary period and the first six years of the disinflationary period, while it started to decline after 1997, when inflationary expectations seem to have been stabilised, and thus, monetary policy was effective at reducing inflation. Empirical findings also detect a sluggish response of inflation to changes in monetary policy. This observed delay seems to have changed little over time.

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File URL: http://www.bankofgreece.gr/BogEkdoseis/paper200413.pdf
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Paper provided by Bank of Greece in its series Working Papers with number 13.

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Length: 40 pages
Date of creation: Jun 2004
Handle: RePEc:bog:wpaper:13
Contact details of provider: Web page: http://www.bankofgreece.gr

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