IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Inflation persistence

  • Jeffrey C. Fuhrer

This paper examines the concept of inflation persistence in macroeconomic theory. It begins with a definition of 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 paper then examines the theoretical sources of persistence, distinguishing “intrinsic” from “inherited” persistence, and deriving a number of analytical results on persistence. It summarizes the implications for persistence from the literatures on “sticky-information” models, learning models, and so-called “trend inflation models,” providing some new results throughout.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bostonfed.org/economic/wp/wp2009/wp0914.htm
Download Restriction: no

File URL: http://www.bostonfed.org/economic/wp/wp2009/wp0914.pdf
Download Restriction: no

Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 09-14.

as
in new window

Length:
Date of creation: 2009
Date of revision:
Handle: RePEc:fip:fedbwp:09-14
Contact details of provider: Postal: 600 Atlantic Avenue, Boston, Massachusetts 02210
Phone: 617-973-3397
Fax: 617-973-4221
Web page: http://www.bos.frb.org/
Email:


More information through EDIRC

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Mumtaz, Haroon & Zabczyk, Pawel & Ellis, Colin, 2009. "What lies beneath: what can disaggregated data tell us about the behaviour of prices?," Bank of England working papers 364, Bank of England.
  2. John B. Taylor, 1998. "An Historical Analysis of Monetary Policy Rules," NBER Working Papers 6768, National Bureau of Economic Research, Inc.
  3. Álvarez, Luis J. & Dhyne, Emmanuel & Hoeberichts, Marco & Kwapil, Claudia & Le Bihan, Hervé & Lünnemann, Patrick & Martins, Fernando & Sabbatini, Roberto & Stahl, Harald & Vermeulen, Philip & Vilmunen, 2006. "Sticky prices in the euro area: a summary of new micro evidence," Discussion Paper Series 1: Economic Studies 2006,02, Deutsche Bundesbank, Research Centre.
  4. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1415-1464, November.
  5. Mark Bils & Peter J. Klenow, 2004. "Some Evidence on the Importance of Sticky Prices," Journal of Political Economy, University of Chicago Press, vol. 112(5), pages 947-985, October.
  6. Marcet, Albert & Sargent, Thomas J, 1989. "Convergence of Least-Squares Learning in Environments with Hidden State Variables and Private Information," Journal of Political Economy, University of Chicago Press, vol. 97(6), pages 1306-22, December.
  7. Michael Woodford, 2007. "Interpreting Inflation Persistence: Comments on the Conference on "Quantitative Evidence on Price Determination"," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 203-210, 02.
  8. Boivin, Jean & Giannoni, Marc & Mihov, Ilian, 2007. "Sticky Prices and Monetary Policy: Evidence from Disaggregated US Data," CEPR Discussion Papers 6101, C.E.P.R. Discussion Papers.
  9. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
  10. N. Gregory Mankiw & Ricardo Reis, 2001. "Sticky Information Versus Sticky Prices: A Proposal to Replace the New Keynesian Phillips Curve," Harvard Institute of Economic Research Working Papers 1922, Harvard - Institute of Economic Research.
  11. Arturo Estrella & Jeffrey C. Fuhrer, 2002. "Dynamic Inconsistencies: Counterfactual Implications of a Class of Rational-Expectations Models," American Economic Review, American Economic Association, vol. 92(4), pages 1013-1028, September.
  12. Bray, Margaret, 1982. "Learning, estimation, and the stability of rational expectations," Journal of Economic Theory, Elsevier, vol. 26(2), pages 318-339, April.
  13. Fuhrer, Jeffrey C., 2008. "Special issue comment on optimal price setting and inflation inertia in a rational expectations model," Journal of Economic Dynamics and Control, Elsevier, vol. 32(8), pages 2536-2542, August.
  14. Jeremy Rudd & Karl Whelan, 2003. "Can rational expectations sticky-price models explain inflation dynamics?," Finance and Economics Discussion Series 2003-46, Board of Governors of the Federal Reserve System (U.S.).
  15. Fischer, Stanley, 1977. "Long-Term Contracts, Rational Expectations, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 85(1), pages 191-205, February.
  16. Caplin, Andrew & Leahy, John, 1991. "State-Dependent Pricing and the Dynamics of Money and Output," The Quarterly Journal of Economics, MIT Press, vol. 106(3), pages 683-708, August.
  17. Maćkowiak, Bartosz & Wiederholt, Mirko, 2009. "Optimal sticky prices under rational inattention," Working Paper Series 1009, European Central Bank.
  18. Ignazio Angelloni & Luc Aucremanne & Michael Ehrmann & Jordi Galí & Andrew Levin & Frank Smets, 2005. "New evidence on inflation persistence and price stickiness in the Euro area: Implications for macro modelling," Economics Working Papers 910, Department of Economics and Business, Universitat Pompeu Fabra.
  19. Zaffaroni, Paolo, 2004. "Contemporaneous aggregation of linear dynamic models in large economies," Journal of Econometrics, Elsevier, vol. 120(1), pages 75-102, May.
  20. Richard Mash, 2004. "Optimising Microfoundations for Inflation Persistence," Economics Series Working Papers 183, University of Oxford, Department of Economics.
  21. Carlos Carvalho, 2005. "Heterogeneity in Price Setting and the Real Effects of Monetary Shocks," Macroeconomics 0509017, EconWPA, revised 12 Sep 2005.
  22. Roberts, John M., 1997. "Is inflation sticky?," Journal of Monetary Economics, Elsevier, vol. 39(2), pages 173-196, July.
  23. Fuhrer, Jeff & Moore, George, 1995. "Inflation Persistence," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 127-59, February.
  24. Jeff Fuhrer & George Moore, 1989. "Monetary policy rules and the indicator properties of asset prices," Finance and Economics Discussion Series 89, Board of Governors of the Federal Reserve System (U.S.).
  25. Timothy Cogley & Giorgio E. Primiceri & Thomas J. Sargent, 2010. "Inflation-Gap Persistence in the US," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(1), pages 43-69, January.
  26. Andrew Atkeson & Lee E. Ohanian., 2001. "Are Phillips curves useful for forecasting inflation?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11.
  27. Andrew T. Levin & Jeremy M. Piger, 2003. "Is inflation persistence intrinsic in industrial economies?," Working Papers 2002-023, Federal Reserve Bank of St. Louis.
  28. Athanasios Orphanides & John C. Williams, 2003. "Imperfect Knowledge, Inflation Expectations, and Monetary Policy," NBER Working Papers 9884, National Bureau of Economic Research, Inc.
  29. Taylor, John B., 1998. "The Robustness and Efficiency of Monetary Policy Rules as Guidelines for Interest Rate Setting by the European Central Bank," Seminar Papers 649, Stockholm University, Institute for International Economic Studies.
  30. Yuriy Gorodnichenko, 2008. "Endogenous information, menu costs and inflation persistence," NBER Working Papers 14184, National Bureau of Economic Research, Inc.
  31. Hasan Bakhshi & Hashmat Khan & Barbara Rudolf, 2004. "The Phillips curve under state-dependent pricing," Bank of England working papers 227, Bank of England.
  32. repec:nbr:nberre:0126 is not listed on IDEAS
  33. John B. Taylor, 1999. "Introduction to "Monetary Policy Rules"," NBER Chapters, in: Monetary Policy Rules, pages 1-14 National Bureau of Economic Research, Inc.
  34. Mavroeidis, Sophocles, 2005. "Identification Issues in Forward-Looking Models Estimated by GMM, with an Application to the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 37(3), pages 421-48, June.
  35. Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
  36. James H. Stock & Mark W. Watson, 2007. "Why Has U.S. Inflation Become Harder to Forecast?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(s1), pages 3-33, 02.
  37. James H. Stock & Mark W. Watson, 2007. "Erratum to "Why Has U.S. Inflation Become Harder to Forecast?"," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(7), pages 1849-1849, October.
  38. Michelle L. Barnes & Fabià Gumbau-Brisa & Denny Lie & Giovanni P. Olivei, 2009. "Closed-form estimates of the New Keynesian Phillips curve with time-varying trend inflation," Working Papers 09-15, Federal Reserve Bank of Boston.
  39. Gray, Jo Anna, 1976. "Wage indexation: A macroeconomic approach," Journal of Monetary Economics, Elsevier, vol. 2(2), pages 221-235, April.
  40. Luca Benati, 2008. "Investigating Inflation Persistence Across Monetary Regimes," The Quarterly Journal of Economics, MIT Press, vol. 123(3), pages 1005-1060, August.
  41. John C. Williams & Andrew T. Levin, 2003. "Robust Monetary Policy with Competing Reference Models," Computing in Economics and Finance 2003 291, Society for Computational Economics.
  42. Sheedy, Kevin D., 2010. "Intrinsic inflation persistence," Journal of Monetary Economics, Elsevier, vol. 57(8), pages 1049-1061, November.
  43. Pivetta, Frederic & Reis, Ricardo, 2007. "The persistence of inflation in the United States," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1326-1358, April.
  44. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
  45. Rotemberg, Julio J, 1983. "Aggregate Consequences of Fixed Costs of Price Adjustment [Sticky Prices and Disequilibrium Adjustment in a Rational Model of the Inflationary Process]," American Economic Review, American Economic Association, vol. 73(3), pages 433-36, June.
  46. Burstein, Ariel T., 2006. "Inflation and output dynamics with state-dependent pricing decisions," Journal of Monetary Economics, Elsevier, vol. 53(7), pages 1235-1257, October.
  47. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
  48. Jeffrey C. Fuhrer, 2006. "Intrinsic and Inherited Inflation Persistence," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
  49. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, 09.
  50. John M. Roberts, 2004. "Monetary policy and inflation dynamics," Finance and Economics Discussion Series 2004-62, Board of Governors of the Federal Reserve System (U.S.).
  51. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-54, April.
  52. Evan F. Koenig, 1996. "Aggregate price adjustment: the Fischerian alternative," Working Papers 9615, Federal Reserve Bank of Dallas.
  53. Benati, Luca, 2009. "Are 'intrinsic inflation persistence' models structural in the sense of Lucas (1976)?," Working Paper Series 1038, European Central Bank.
  54. Granger, C. W. J., 1980. "Long memory relationships and the aggregation of dynamic models," Journal of Econometrics, Elsevier, vol. 14(2), pages 227-238, October.
  55. Sims, Christopher A., 2003. "Implications of rational inattention," Journal of Monetary Economics, Elsevier, vol. 50(3), pages 665-690, April.
  56. Edmund S. Phelps, 1968. "Money-Wage Dynamics and Labor-Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 76, pages 678.
  57. Rotemberg, Julio J, 1982. "Sticky Prices in the United States," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1187-1211, December.
  58. Carvalho Carlos, 2006. "Heterogeneity in Price Stickiness and the Real Effects of Monetary Shocks," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(3), pages 1-58, December.
  59. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-76, December.
  60. Robert J. Gordon & Stephen R. King, 1982. "The Output Cost of Disinflation in Traditional and Vector Autoregressive Models," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 13(1), pages 205-244.
  61. Altissimo, Filippo & Mojon, Benoit & Zaffaroni, Paolo, 2009. "Can aggregation explain the persistence of inflation?," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 231-241, March.
  62. Ireland, Peter N., 2003. "Comment on: Robust monetary policy with competing reference models," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 977-982, July.
  63. Filippo Altissimo & Michael Ehrmann & Frank Smets, 2006. "Inflation persistence and price-setting behaviour in the euro area – a summary of the IPN evidence," Occasional Paper Series 46, European Central Bank.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedbwp:09-14. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catherine Spozio)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.