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Is Inflation Persistence Intrinsic in Industrial Economies?

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  • Andrew Levin
  • Jeremy Piger

Abstract

We apply both classical and Bayesian econometric methods to characterize the dynamic behavior of inflation for twelve industrial countries over the period 1984-2003, using four different price indices for each country. In particular, we estimate a univariate autoregressive (AR) model for each series, and consider the possibility of a structural break at an unknown date. For many of these countries, we find strong evidence for a break in the intercept of the AR equation in the late 1980s or early 1990s. Allowing for a break in intercept, the inflation measures generally exhibit relatively low inflation persistence. Evidently, high inflation persistence is not an inherent characteristic of industrial economies.
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Suggested Citation

  • Andrew Levin & Jeremy Piger, 2003. "Is Inflation Persistence Intrinsic in Industrial Economies?," Computing in Economics and Finance 2003 298, Society for Computational Economics.
    • Handle: RePEc:sce:scecf3:298
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    More about this item

    Keywords

    inflation dynamics; Bayesian econometrics; persistence; structural change;
    All these keywords.

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • 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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