Measuring and Explaining Inflation Persistence: Disaggregate Evidence on the Czech Republic

Ian Babetskii, Fabrizio Coricelli and Roman Horvath
Additional contact information
Ian Babetskii: Czech National Bank, http://www.cnb.cz/en/index.html
Authors registered in the RePEc Author Service: Jan Babecký

No 2007/22, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: The paper provides an empirical analysis of inflation persistence in the Czech Republic using 412 detailed product-level consumer price indexes underlying the consumer basket over the period from 1994:M1 to 2005:M12. Subject to various sensitivity tests, our results suggest that raw goods and non-durables, followed by services, display smaller inflation persistence than durables and processed goods. Inflation seems to be somewhat less persistent after the adoption of inflation targeting in 1998. There is also evidence for aggregation bias, that is, aggregate inflation is found to be more persistent than the underlying detailed components. Price dispersion, as a proxy for the degree of competition, is found to be negatively related to inflation persistence, suggesting that competition is not conducive to reducing persistence.

Keywords: inflation dynamics; persistence; inflation targeting (search for similar items in EconPapers)
JEL-codes: D40 E31 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2007-08, Revised 2007-08
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Working Paper: Measuring and Explaining Inflation Persistence: Disaggregate Evidence on the Czech Republic (2007)
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