We use noncausal autoregressions to examine the persistence properties of quarterly US consumer price inflation from 1970:1 to 2012:2. These nonlinear models capture the autocorrelation structure of the inflation series as accurately as their conventional causal counterparts, but they allow for persistence to depend on the size and sign of shocks to inflation as well as the inflation rate. Inflation persistence has decreased since the early 1980s, after which persistence is also greater following small and negative shocks than large and positive ones. At high levels of inflation, shocks are absorbed more slowly before the early 1980s and faster thereafter compared to low levels of inflation.
I thank Pentti Saikkonen for helpful discussions, and Bruce Mizrach (the editor) and an anonymous referee for useful comments. I acknowledge financial support from the Academy of Finland, the OP-Pohjola Group Research Foundation, and CREATES (DNRF78) funded by the Danish National Research Foundation. Part of this research was done while the author was visiting the German Institute for Economic Research in Berlin, whose hospitality is gratefully acknowledged.
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