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Is inflation persistence intrinsic in industrial economies?

  • Andrew T. Levin
  • Jeremy M. Piger

We apply both classical and Bayesian econometric methods to characterize the dynamic behavior of inflation for twelve industrial countries over the period 1984-2003, using four different price indices for each country. In particular, we estimate a univariate autoregressive (AR) model for each series, and consider the possibility of a structural break at an unknown date. For many of these countries, we find strong evidence for a break in the intercept of the AR equation in the late 1980s or early 1990s. Allowing for a break in intercept, the inflation measures generally exhibit relatively low inflation persistence. Evidently, high inflation persistence is not an inherent characteristic of industrial economies.

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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2002-023.

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Date of creation: 2003
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Handle: RePEc:fip:fedlwp:2002-023
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