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reduced-form inflation persistence should be measured. A natural measure of persistence is the impulse response function implied by the inflation process, which shows how quickly the effect of a shock to inflation vanishes. Following the previous literature, Fuhrer (2010) emphasizes persistence measures based on autocorrelation, which are indeed reasonable if inflation dynamics are well described by a conventional (causal) autoregressive (AR) process, as is typically assumed. However, if this not the case, there is, in general, no one-for-one correspondence between the

Has Inflation Persistence Changed under EMU? Peter Tillmann Justus-Liebig-University Giessen Abstract. This paper analyzes the persistence of inflation in the euro area and, in particular, whether the persistence properties have changed since the start of European Monetary Union(EMU). For that purpose, we compare pre- and post-EMU inflation persistence, use rolling-window estimates of persistence, and apply tests specifically designed to detect break dates near the end of the sample period. In contrast to previ- ous research, we find that inflation persistence

Studies in Nonlinear Dynamics & Econometrics Volume 13, Issue 4 2009 Article 1 Changes in U.S. Inflation Persistence Kyu Ho Kang∗ Chang-Jin Kim† James Morley‡ ∗Washington University in St. Louis, khkang@wustl.edu †Korea University and University of Washington, changjin@u.washington.edu ‡Washington University in St. Louis, james.morley@unsw.edu.au Changes in U.S. Inflation Persistence∗ Kyu Ho Kang, Chang-Jin Kim, and James Morley Abstract We investigate the existence and timing of changes in U.S. inflation persistence. To do so, we develop an unobserved components

autocorrelation properties of a stationary inflation rate, the picture is considerably murkier.” We revisit the changing nature of inflation persistence in the US. We add to the literature on inflation persistence in three ways. First, we use a quantile regression approach which allows us to examine the degree of inflation persistence at different conditional quantiles of inflation. Thus far the literature focuses on persistence evaluated at the conditional mean. This neglects the fact that inflation following shocks drawn from the tails of the shock distribution might exhibit

References [1] Aristide, O., 2007. Impactul salariilor din economie asupra inflaţiei şi deficitului comercial. Caiet de studii nr. 24/ 2007 . Banca Naţională a României. [2] Boţel, C., 2010. Persistenţa inflaţiei şi cauzele acesteia. Colocviul Provocări actuale la adresa politicii monetare , National Bank of Romania. [3] Caraiani, P., 2009a. Inflation persistence and DSGE models. An application on Romanian economy. Journal of Economic Computation and Economic Cybernetics Studies andResearch , no. 3. [4] Caraiani, P., 2009b. An Estimation Of Output Gap In

The B.E. Journal of Macroeconomics Topics Volume 11, Issue 1 2011 Article 24 Micro-Data on Nominal Rigidity, Inflation Persistence and Optimal Monetary Policy Engin Kara∗ ∗University of Bristol, engin.kara@bristol.ac.uk Recommended Citation Engin Kara (2011) “Micro-Data on Nominal Rigidity, Inflation Persistence and Optimal Monetary Policy,” The B.E. Journal of Macroeconomics: Vol. 11: Iss. 1 (Topics), Article 24. Micro-Data on Nominal Rigidity, Inflation Persistence and Optimal Monetary Policy∗ Engin Kara Abstract The micro-data on prices indicate that prices

area and use it to analyse how differences in national inflation and growth rates arise within the European Economic and Monetary Union (EMU). We find that the main source of differentials in the early years of the EMU have been aggregate demand shocks, followed by cost-push shocks; euro exchange rate shocks come third. Among the propagation mechanisms a key role is played by inflation persistence; for plausible parameter values even small changes in persistence can produce a dramatic increase in the dif- ferentials. Finally, we also find that a tight control of

model generates long-lasting deviations of inflation from target, providing an alternative (but also a complement) to the popular Barro-Gordon framework. Second, the economy exhibits large inflation persistence and can have very rich inflation dynamics. The model is able to account for approximately one third of the increase in inflation in the United States in the late 1970s, and sug- gests an explanation for the low inflation of the late 1990s. Moreover, I present empirical evidence for the United States and other countries that support the model including a new

many of the empirical patterns found in the data. 2 The original NKPCs were founded on contracting ideas from Taylor (1980) and Calvo (1983). However, performance issues, such as the lack of inflation persistence, led to the introduction of backward looking terms to these basic rational agent models. Fuhrer and Moore (1995) and Fuhrer (1997, 2006) advocate a contracting idea from Buiter and Jewitt (1981) to motivate the backward looking term, while Galí and Gertler (1999) use an empirical motivation for the backward term along with a marginal cost structure

: inflation expectations, sticky information, inflation persistence ∗Döpke: University of Applied Sciences, Merseburg, Germany, joerg.doepke@hs-merseburg.de, http://www.hs-merseburg.de/∼jdoepke/; Dovern: Kiel Institute for the World Economy (IfW Kiel), Germany, jonas.dovern@ifw-kiel.de, http://www.uni-kiel.de/ifw/staff/dovern e.htm; Fritsche: University Hamburg and German Institute for Economic Research (DIW Berlin), Ger- many, ulrich.fritsche@wiso.uni-hamburg.de, http://www.ulrich-fritsche.net/; Slacalek: European Central Bank, Frankfurt am Main, Germany, jiri