Measuring Inflation Persistence: A Structural Time Series Approach

Dossche, Maarten; Everaert, Gerdie

doi:10.2139/ssrn.1690515

Cited by 139 publications

(26 citation statements)

References 73 publications

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“…In general, his results confirm that more flexibility assumed for the mean of inflation delivers lower estimates of persistence. Similar results for the US and the euro area are provided by Dossche and Everaert (2005), who model the time-varying mean as an AR(2) process. Benati (2006), in the framework of AR(p) representation of inflation series for 21 countries, allows for random-walk time-varying parameters.…”

Section: Literature Reviewsupporting

confidence: 66%

Analysis of Inflation Persistence in Serbia

Miletić¹,

Miletić²

2016

APE

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In this paper, we analyzed inflation persistence in Serbia, both at the aggregate level as well as for the different components of the consumer price index. The analysis was done for the series of prices given on the quarterly basis for the period from 2002q1 to 2013q2. We applied univariate autoregression model (AR) of order p, whereby sum of autoregression coefficients was used as a measure of inflation persistence. In addition, special attention was paid to the problem of structural breaks in the series of inflation as it may overestimate the level of inflation persistence and could give misleading signals. The importance of appropriate assessment of the inflation persistence stems from the fact that the impossibility of faster return of inflation to the long-run equilibrium level, after external or domestic shock, has implications on the conducting of monetary policy and represents a major challenge for its effectiveness, especially in emerging countries like Serbia. If the persistence of inflation is higher, monetary policy reaction should be stronger and proactive. If the estimated level and persistence of inflation is lower in comparison with previous empirical analysis, this could suggest that inflation expectations are now better anchored, which is particularly important for countries with inflation targeting regime. Results of the analysis indicate that the inflation persistence in the Serbia is modest and that is higher at the aggregate level compared to the simple average of the components of the consumer price index. This is probably consequence of so-called aggregation effect, since the highest persistency have the prices of those products with the largest share in the consumer basket. In the case of Serbia, food prices have the highest degree of persistence and the largest share in the consumer basket.

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Section: Literature Reviewsupporting

confidence: 66%

Analysis of Inflation Persistence in Serbia

Miletić¹,

Miletić²

2016

APE

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“…4 Differences in the dynamic relationship between core and headline inflation across a 1979 or early 1980s sample split have been identified by other authors as well: Blinder and Reis (2005), Ball andMazumder (2011), Clark (2001), Mishkin (2007), Rosengren (2011), Rich and Steindel (2005), and Smith (2005). 5 See also Benati (2008), Dossche and Everaert (2005), Hondroyiannis and Lazaretou (2004), Lansing (2009), Levin and Piger (2002), Leduc, Keith, andTom, 2007. See Fuhrer (2009) for a comprehensive review of the literature on inflation persistence.…”

Section: Introductionmentioning

confidence: 88%

The dynamic relationship between core and headline inflation

Gamber

Smith

Eftimoiu

2015

Journal of Economics and Business

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“…But the flexible inflation targeting rule better approximates optimal policy than any rule in either of 70 The fact that in each of these cases a somewhat negative value of φ b would be better than any positive value is not accidental. It is an implication of our observation, in the previous section, that it is quite generally desirable to reduce the Taylor rule intercept in response to an increase in credit spreads.…”

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confidence: 92%

Credit Frictions and Optimal Monetary Policy

Cúrdia

Woodford

2008

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Papers presented at this conference are made available to a broader audience in the NBB Working Paper Series (www.nbb.be). Terms of use: Documents in Statement of purpose:The purpose of these working papers is to promote the circulation of research results (Research Series) and analytical studies (Documents Series) made within the National Bank of Belgium or presented by external economists in seminars, conferences and conventions organised by the Bank. The aim is therefore to provide a platform for discussion. The opinions expressed are strictly those of the authors and do not necessarily reflect the views of the National Bank of Belgium. Abstract We extend the basic (representative-household) New Keynesian [NK] model of the monetary transmission mechanism to allow for a spread between the interest rate available to savers and borrowers, that can vary for either exogenous or endogenous reasons. We find that the mere existence of a positive average spread makes little quantitative difference for the predicted effects of particular policies. Variation in spreads over time is of greater significance, with consequences both for the equilibrium relation between the policy rate and aggregate expenditure and for the relation between real activity and inflation. OrdersNonetheless, we find that the target criterion -a linear relation that should be maintained between the inflation rate and changes in the output gap -that characterizes optimal policy in the basic NK model continues to provide a good approximation to optimal policy, even in the presence of variations in credit spreads. We also consider a "spread-adjusted Taylor rule," in which the intercept of the Taylor rule is adjusted in proportion to changes in credit spreads. We show that while such an adjustment can improve upon an unadjusted Taylor rule, the optimal degree of adjustment is less than 100 percent; and even with the correct size of adjustment, such a rule of thumb remains inferior to the targeting rule.

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Measuring Inflation Persistence: A Structural Time Series Approach

Cited by 139 publications

References 73 publications

Analysis of Inflation Persistence in Serbia

Analysis of Inflation Persistence in Serbia

The dynamic relationship between core and headline inflation

Credit Frictions and Optimal Monetary Policy

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