Did the Underlying Behaviour of Inflation Change in the 1980s? A Study of 17 Countries
During the 1980s, the reduction of inflation was a major policy objective for many countries. However, a key question is whether these deflationary policies merely reduced the level of inflation or actually changed the underlying process determining inflation. In this paper we examine the persistence of inflation in order to judge whether the underlying behaviour of inflation changed in the 1980s. This is an important question as a reduction in the persistence of inflation will reduce the unemployment costs of deflationary policies. Membership of the ERM implies that countries should adopt policies which, via several transmission mechanisms, will reduce the persistence of inflation. The primary objective of this study is to discover whether the ERM member countries have experienced a regime change to a lower degree of persistence for inflation in the 1980s compared to the 1970s. In addition, the process determining inflation in some non-ERM countries - some following restrictive anti-inflation policies and some not - is evaluated and compared with members of the ERM in order to see if there is any discernible difference. The results provide mixed evidence of the achievements of the ERM. Some results give the impression that deflationary policies associated with ERM membership may have reduced the mean level of inflation, but did not reduce the persistence parameter over the last decade. Conversely, if we do not allow for a change in the mean of inflation we find that the persistence parameter does decline for a majority of ERM members. Furthermore, the results show stronger evidence of a fall in inflation persistence for the non-ERM countries who adopted a strong anti-inflationary stance.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
|Date of creation:||Aug 1996|
|Date of revision:|
|Contact details of provider:|| Postal: 2 Dean Trench Street Smith Square London SW1P 3HE|
Web page: http://niesr.ac.uk
When requesting a correction, please mention this item's handle: RePEc:nsr:niesrd:237. 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: (Library & Information Manager)
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.