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Inflation persistence in the euro-area, US, and new members of the EU: Evidence from time-varying coefficient models

Author

Listed:
  • Zsolt Darvas

    (Corvinus University of Budapest)

  • Balázs Varga

    (Corvinus University of Budapest)

Abstract

This paper studies inflation persistence with time-varying-coefficient autoregressions in response to recently discovered structural breaks in historical inflation time series of the euro-area and the US. To this end, we compare the statistical properties of the well known ML estimation using the Kalman-filter and the less known Flexible Least Squares estimator by Monte Carlo simulation. We also suggest a procedure for selecting the weight for FLS based on an iterative Monte Carlo simulation technique calibrated to the time series in question. We apply the methods for the study of inflation persistence of the US, the euro-area and the new members of the EU

Suggested Citation

  • Zsolt Darvas & Balázs Varga, 2007. "Inflation persistence in the euro-area, US, and new members of the EU: Evidence from time-varying coefficient models," Money Macro and Finance (MMF) Research Group Conference 2006 137, Money Macro and Finance Research Group.
    • Handle: RePEc:mmf:mmfc06:137
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    File URL: http://www.uni-corvinus.hu/darvas/pdf/Darvas_Varga_PERSIST_paper.pdf
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    File URL: http://repec.org/mmf2006/up.21061.1145742414.pdf
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    Citations

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    Cited by:

    1. Michal Franta & Branislav Saxa & Kateøina Šmídková, 2010. "The Role of Inflation Persistence in the Inflation Process in the New EU Member States," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 60(6), pages 480-500, December.

    More about this item

    Keywords

    flexible least squares; inflation persistence; Kalman-filter; time-varying coefficient models;
    All these keywords.

    JEL classification:

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

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