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Measuring inflation persistence: a structural time series approach

  • M. DOSSCHE

    ()

  • G. EVERAERT

    ()

Using a structural time series approach we measure different sorts of inflation persistence allowing for an unobserved time-varying inflation target. Unobserved components are identified using Kalman filtering and smoothing techniques. Posterior densities of the model parameters and the unobserved components are obtained in a Bayesian framework based on importance sampling. We find that inflation persistence, expressed by the half life of a shock, can range from 1 quarter in case of a cost-push shock to several years for a shock to long-run inflation expectations or the output gap.

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Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 05/340.

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Length: 42 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:rug:rugwps:05/340
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