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Examining the Time-Variation of Inflation Persistence in Ten Euro Area Countries

Author

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  • Nektarios A. Michail

    (Central Bank of Cyprus)

Abstract

Inflation persistence in ten Euro Area economies is examined, using a long series of monthly data. Full sample estimates find persistence to be close to unity and tests for structural breaks show that while these exist, they are rare. Rolling estimates of persistence, based on a mean reversion measure, suggest that even though persistence has been volatile, it has not reached values below 0.8. The findings lend support to the view that the introduction of the common currency has reduced inflation persistence in many countries. In contrast, the global financial crisis appears to have had a positive impact on persistence.

Suggested Citation

  • Nektarios A. Michail, 2016. "Examining the Time-Variation of Inflation Persistence in Ten Euro Area Countries," Working Papers 2016-6, Central Bank of Cyprus.
    • Handle: RePEc:cyb:wpaper:2016-6
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    More about this item

    Keywords

    inflation; persistence; euro area; mean reversion;
    All these keywords.

    JEL classification:

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

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