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Inflation Persistence: Revisited

Listed author(s):
  • Edward N. Gamber

    (Lafayette College)

  • Jeffrey P. Liebner

    (Lafayette College)

  • Julie K. Smith

    (Lafayette College)

This paper presents evidence on the persistence of inflation in the United States over the period 1947- 2010. Of particular interest is whether the persistence of inflation has changed over that time period. We use a reduced form approach to measuring inflation persistence, modeling inflation as an autoregressive process. We measure persistence as the half-life of a shock to that process. Our analysis employs both a frequentist approach and a Bayesian approach to identify breaks in inflation persistence. Both our frequentist and Bayesian results indicate that inflation persistence has undergone significant changes over the past 60 years.

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File URL: https://www2.gwu.edu/~forcpgm/2013-002.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by The George Washington University, Department of Economics, Research Program on Forecasting in its series Working Papers with number 2013-002.

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Length: 25 pages
Date of creation: Apr 2013
Handle: RePEc:gwc:wpaper:2013-002
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  1. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  2. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
  3. Olivier Blanchard & Jordi Galí, 2005. "Real wage rigidities and the new Keynesian model," Economics Working Papers 912, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2005.
  4. Batini, Nicoletta, 2002. "Euro area inflation persistence," Working Paper Series 0201, European Central Bank.
  5. Conrad, Christian & Eife, Thomas A., 2012. "Explaining Inflation-Gap Persistence by a Time-Varying Taylor Rule," Working Papers 0521, University of Heidelberg, Department of Economics.
  6. Sharon Kozicki & Peter A. Tinsley, 2003. "Permanent and transitory policy shocks in an empirical macro model with asymmetric information," Research Working Paper RWP 03-09, Federal Reserve Bank of Kansas City.
  7. Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  8. 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.
  9. Beechey, Meredith & Österholm, Pär, 2007. "The Rise and Fall of U.S. Inflation Persistence," Working Paper Series 2007:18, Uppsala University, Department of Economics.
  10. Antonio Noriega & Carlos Capistrán & Manuel Ramos-Francia, 2013. "On the dynamics of inflation persistence around the world," Empirical Economics, Springer, vol. 44(3), pages 1243-1265, June.
  11. Yash P. Mehra & Devin Reilly, 2009. "Short-term headline-core inflation dynamics," Economic Quarterly, Federal Reserve Bank of Richmond, issue Sum, pages 289-313.
  12. George Hondroyiannis & Sophia Lazaretou, 2004. "Inflation Persistence during Periods of Structural Change: An Assessment Using Greek Data," Working Papers 13, Bank of Greece.
  13. 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.
  14. Athanasios Orphanides, 2002. "Monetary-Policy Rules and the Great Inflation," American Economic Review, American Economic Association, vol. 92(2), pages 115-120, May.
  15. Pesaran, M Hashem & Pettenuzzo, Davide & Timmermann, Allan G, 2004. "Forecasting Time Series Subject to Multiple Structural Breaks," CEPR Discussion Papers 4636, C.E.P.R. Discussion Papers.
  16. Benati, Luca, 2008. "Investigating inflation persistence across monetary regimes," Working Paper Series 0851, European Central Bank.
  17. 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.
  18. Jeff Fuhrer & George Moore, 1995. "Inflation Persistence," The Quarterly Journal of Economics, Oxford University Press, vol. 110(1), pages 127-159.
  19. Noriega, Antonio E. & Ramos-Francia, Manuel, 2009. "The dynamics of persistence in US inflation," Economics Letters, Elsevier, vol. 105(2), pages 168-172, November.
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