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Noncausality and Inflation Persistence


  • Markku Lanne


We use noncausal autoregressions to examine the persistence properties of quarterly U.S. consumer price inflation from 1970:1.2012:2. These nonlinear models capture the autocorrelation structure of the inflation series as accurately as their conventional causal counterparts, but they allow for persistence to depend on the size and sign of shocks to inflation as well as the inflation rate. Inflation persistence has decreased since the early 1980.s, after which persistence is also greater following small and negative shocks than large and positive ones. At high levels of inflation, shocks are absorbed more slowly before the early 1980.s and faster thereafter compared to low levels of inflation.

Suggested Citation

  • Markku Lanne, 2013. "Noncausality and Inflation Persistence," Discussion Papers of DIW Berlin 1286, DIW Berlin, German Institute for Economic Research.
  • Handle: RePEc:diw:diwwpp:dp1286

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    References listed on IDEAS

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    Cited by:

    1. Dimitrakopoulos, Stefanos, 2017. "Semiparametric Bayesian inference for time-varying parameter regression models with stochastic volatility," Economics Letters, Elsevier, vol. 150(C), pages 10-14.

    More about this item

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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