Measuring inflation persistence: a structural time series approach

No 495, Working Paper Series from European Central Bank

Abstract: Time series estimates of inflation persistence incur an upward bias if shifts in the inflation target of the central bank remain unaccounted for. Using a structural time series approach we measure different sorts of inflation persistence allowing for an unobserved time-varying inflation target. Unobserved components are identified using Kalman filtering and smoothing techniques. Posterior densities of the model parameters and the unobserved components are obtained in a Bayesian framework based on importance sampling. We find that inflation persistence, expressed by the half-life of a shock, can range from 1 quarter in case of a cost-push shock to several years for a shock to long-run inflation expectations or the output gap. JEL Classification: C11, C13, C22, C32, E31

Keywords: Bayesian analysis; inflation persistence; inflation target; Kalman filter (search for similar items in EconPapers)
Date: 2005-06
Note: 3577821
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Citations: View citations in EconPapers (46)

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Related works:
Working Paper: Measuring inflation persistence: A structural time series approach (2005)
Working Paper: Measuring inflation persistence: a structural time series approach (2005)
Working Paper: Measuring inflation persistence: a structural time series approach (2005)
Working Paper: Measuring Inflation Persistence: A Structural Time Series Approach (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:2005495

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