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When Inflation Persistence Really Matters: Two examples

  • Tatiana Kirsanova
  • David Vines
  • Simon Wren-Lewis

In this paper we present two examples where the presence of inflation persistence could influence the qualitative nature of monetary policy. In the first case the desirability of a monetary policy regime comes under question when extensive inflation persistence exists. In the second case the direction in which interest rates move following a cost push shock changes when inflation persistence becomes important. In both cases, inflation persistence is central to the process influencing policy.

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1351.

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Length: 23 pages
Date of creation: Jun 2007
Date of revision:
Handle: RePEc:kie:kieliw:1351
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