Title: Inflation persistence: revisited
Authors: Edward N. Gamber; Jeffrey P. Liebner; Julie K. Smith
Macroeconomic Analysis Division, Congressional Budget Office, Washington, DC 20515, USA
Department of Mathematics, Lafayette College, Easton, PA, 18042, USA
Department of Economics, Lafayette College, Easton, PA, 18042, USA
Abstract: This paper presents evidence on the persistence of inflation in the USA over the period 1949-2014. Of particular interest is whether the persistence of inflation has changed over that time period. We use a reduced form approach to measuring inflation persistence, modelling inflation as an autoregressive process. We measure persistence as the half-life of a shock to that process. Our analysis employs both a Frequentist approach and a Bayesian approach to identify breaks in inflation persistence. Both our Frequentist and Bayesian results indicate that inflation persistence has undergone significant changes over the past 60 years.
Keywords: inflation persistence; Bayesian econometrics; half-life; breakpoints; inflation modelling; Frequentist econometrics.
Int. J. of Monetary Economics and Finance, 2016 Vol.9, No.1, pp.25 - 44
Date of acceptance: 28 May 2015
Available online: 05 Feb 2016